The Main Events of the Week. October 07, 2013

October 7, 2013

The US dollar rose on Friday against most major currencies after five days of decline and recovered almost all its weekly losses according to the dollar index – amid the expectations that American authorities will manage to solve the US budget problems in the nearest days. Non-Farm Payrolls report wasn’t released on Friday and its publication is postponed indefinitely.

According to the results of the week the dollar lost 0.15% to the dollar index falling for four weeks in a row. The dollar dropped against the Australian dollar (-1.29%), Japanese yen (0.73%), New Zealand dollar (0.57%), euro (-0.25%) and Canadian dollar (-0.12%) – but it rose against the British pound (+0.76%) and Swiss franc (+0.15%). The dollar got under pressure last week amid aggravated budget and debt crisis in the USA, government shutdown and difficulties in negotiations between republicans and democrats in the Congress on budget issues and coming national debt ceiling increase term. 

Despite the fact that no compromise between the White House and the Congress is reached, the first encouraging signs of confrontation overcome appeared on Friday – the representatives of the Republican Party in the US Congress started to soften their position towards ObamaCare and now they are more inclined to a more comprehensive agreement on budget which would include debt ceiling increase.

According to the Goldman Sachs a compromise on both key issues: budget and debt – will be not made before the end of this week and both problems will be solved with a single package deal. The most possible term is close to October 17. In the past the shutdown of the US public institutions financing happened 17 times for the last 40 years and continued from one day to three weeks. The last crisis was in late 1995 – early 1996 and was record long -21 days.

This week the markets will wait for the US fiscal budget settlement and a lot of US statistics published by state institutions are unlikely to be released. These are Trade Balance (Tuesday), Wholesale Inventories (Wednesday), Import Prices (Thursday); Retail Sales and Producer Price Index (Friday). Only nongovernmental agencies and also Federal Reserve data will be released. The main event will be the publication of FOMC Meeting Minutes on Wednesday. On Tuesday NFIB Small Business Optimism and IBD/TIPP Economic Optimism will be released; and on Friday - Preliminary U. of Michigan Consumer Sentiment. Tuesday, October 8 is the start of American companies Earnings Season for the third quarter which will last till the middle of November.

In the euro-zone the Final GDP for the second quarter and Sentix Investor Confidence will be released on Monday and ECB Monthly Bulletin- on Thursday. In Germany Trade Balance and Factory Orders will be released on Tuesday and on Wednesday – Industrial Output. Also Industrial Output will be released in France and Italy on Thursday. Industrial Output and Factory Orders growth is expected in Germany in August in comparison with weak July data.

The Bank of England publishes the results of its monthly meeting on Thursday; no changes in the policy are expected. Industrial output and trade balance of the UK will be released on Wednesday. In Japan Trade Balance and Current Account will be released on Tuesday, on Wednesday – BoJ Meeting Minutes from September 4-5 and on Thursday - Core Machinery Orders. Chinese Trade Balance will be released on Saturday. 

In Australia labour force data are due on Thursday, on Tuesday - NAB Business Confidence, on Wednesday - Westpac Consumer Sentiment. In New Zealand NZIER Business Confidence will be released on Tuesday and on Thursday - Business NZ Manufacturing Index. In Canada Building Permits will be released on Monday, on Tuesday – Trade Balance, on Thursday – New Housing Price Index and on Friday – labour market report.

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