Week Ahead: Fate of the dollar might not be determined by the Fed or NFP

• Larger-than-expected Treasury issuance could lead to worsening budget deficit concerns
• Nikkei reported that BOJ is considering a further adjustment to its YCC framework
• FOMC expected to keep rates on hold and maintain a tightening bias

Forex traders always brace for a big week anytime you have an FOMC decision and the nonfarm payroll report on the same week, but this week is different. Wall Street will also be paying close attention to the BOJ rate decision and the Treasury’s quarterly refunding announcement. Earlier on Monday, the Nikkei reported that is set to consider further adjustment to its YCC framework at its Tuesday meeting. Currency traders know the BOJ needs to lift the yield cap, but policymakers have been effective in delaying expectations on when that will happen.  The bond market appears to be pressuring central banks and a tweak to YCC seems likely, which means the departure from negative rate territory could happen at the January BOJ decision.

On Wednesday, it won’t just be fixed income traders paying close attention to the 8:30 am est release of the Treasury quarterly funding announcement.  Every trader knows that if the bond market selloff resumes, that could have a crippling effect on growth prospects and trigger a move into safe-havens.  If Treasury auctions size are larger than expected, budget deficit concerns will grow, which could lead to continued tepid demand during future Treasury auctions.  Everyone will want to know how far out they go out on the curve and how much will they sell.

USD/JPY hourly chart

The US dollar could go on a rollercoaster as bond market volatility is expected to be elevated given all the rate decisions and Treasury’s funding plans. Dollar-yen fell over 70 pips on the Nikkei report that BOJ could let the 10-year exceed 1.00%, but that doesn’t mean the dollar’s days are numbered.  The US growth story could still remain intact post-Fed and if the NFP report still shows the labor market remains healthy and if Wall Street isn’t spooked by the Treasury.

Monday, Oct. 30

Economic Data/Events:

• Australia retail sales
• Eurozone economic confidence, consumer confidence
• Germany CPI, GDP
• Spain CPI
• China’s key financial policy gathering day led by Chinese President Xi Jinping
• NATO Secretary General Stoltenberg, Nordic premiers and foreign ministers attend Nordic Council meeting in Oslo
• ECB’s Visco speaks in Rome.
• Italian, German, French industry ministers hold trilateral meeting in Rome.
• Riksbank Governor Thedeen speaks in New York.

Tuesday, Oct. 31

Economic Data/Events:

• BOJ Rate Decision: To keep rates on hold, possibly tweak YCC by allowing 10-year yields exceed 1%
• US Conference Board consumer confidence, employment cost index
• Japan unemployment, industrial production, retail sales
• China October manufacturing PMI: 50.8e v 50.6 prior; non-manufacturing (services): 52.0e v 51.7 prior
  
• Czech Republic GDP
• Eurozone CPI, GDP
• France CPI, GDP
• Hong Kong GDP
• Italy GDP, CPI
• Mexico international reserves, GDP
• New Zealand building permits
• Poland CPI
• Saudi Arabia GDP
• South Africa trade balance
• Thailand trade
• RBA’s Jones at the AFIA Conference, Sydney.
• ECB’s Ignazio Visco speaks on final day as Bank of Italy governor.
• French President Macron begins visit to Kazakhstan and Uzbekistan.

Wednesday, Nov. 1

Economic Data/Events:

• US Treasury quarterly refunding announcement. Could be main event of the week.
• FOMC Decision: Expected to keep rates on hold and maintain a tightening bias
• US construction spending, ISM Manufacturing, JOLTS job openings, light vehicle sales
• Australia building approvals
• China Caixin manufacturing PMI
• India Manufacturing PMI
• New Zealand unemployment
• Russia unemployment
• UK Manufacturing PMI
• All Saints holiday in much of Europe.
• Fabio Panetta begins his six-year term as Bank of Italy governor and ECB Governing Council member.
• Piero Cipollone starts eight-year term as ECB Executive Board member.
• SNB President Jordan and Board member Gerlach speak in Bern
• Reserve Bank of New Zealand publishes financial stability report.

Thursday, Nov. 2

Economic Data/Events:

• US factory orders, initial jobless claims, productivity
• Australia trade balance
• European Manufacturing PMIs: Eurozone, France, Germany
• UK BOE rate decision: Expected to keep bank rate steady at 5.25%
• Norges Bank rate decision: Expected to keep deposit rates steady at 4.25%.
• Czech central bank rate decision: Expected to cut rates by 25bps to 6.75%
• Earnings from Apple
• ECB Chief Economist Philip Lane seminar at University of Limerick.
• SNB President Thomas Jordan and Band for International Settlements chief Augustin Carstens speak in Zurich.
• Serbian Energy Minister Djedovic, EU envoy Emanuel Gioffret, representatives of key gas companies in southeastern Europe attend two-day regional conference on gas supplies, trade in Belgrade

Friday, Nov. 3

Economic Data/Events:

• US Jobs Report:  October Change in nonfarm payrolls: 180ke v 336K prior, unemployment rate: 3.8%e  3.8% prior; Average hourly earnings m/m: 0.3%e v 0.2% prior
• Canada Job Change, unemployment
• China Caixin services PMI
• Eurozone unemployment
• France industrial production
• Italy unemployment
• Singapore retail sales
• Spain unemployment
• BOE’s Haskel speaks on a panel at Bank of England Watchers’ Conference.
• BOE’s Pill speaks to regional agents about the Monetary Policy Report.
• German Finance Minister Christian Lindner and Swiss Finance Minister Keller-Sutter speak in Lucerne.

Sovereign Rating Updates:

– Denmark (Fitch)

– Switzerland (Fitch)

– Norway (Moody’s)

– Ireland (DBRS)

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