Next week will again be rich in important news. Every working day of the coming week will not do without at least one important event, but we recommend paying special attention to the news of Monday, Wednesday and Thursday. Mainly, it will be news from the developed countries of the West and the East, related to economic growth and inflation.
It is very interesting on Monday, November 11, to observe the statistics on the growth rate of THE UK GDP in the third quarter of 2019, which will be released at 12:30 Moscow time. Data on the growth of the UK economy for the 3rd quarter compared to the 2nd quarter of this year will be particularly important. Recall that in the second quarter compared to the first quarter of 2019, instead of the expected zero growth, the UK economy showed a decline of 0.2%, therefore, in the year-on-year for the second quarter of 2019, the growth of the British economy was only 1.3%, although in 1. the economy grew by 1.8% in the quarter. The reason for the economic downturn in the second quarter in the quarter was, firstly, a 1.3% decline in the construction industry, as well as a decline in industrial production, related, among other things, to the closure of several locations in the UK. car factories in preparation for the upcoming Brexit. In the third quarter, analysts predict that the UK’s annual economic growth could also reach 1.3%. Let’s see on Monday how expectations of Brexit will actually affect the dynamics of the UK GDP for the third quarter of 2019.
On Wednesday, November 13, the working day of analysts and traders of the foreign exchange market will be under the sign of inflation, and this time statistics on the rate of inflation will be made public in one day, but at different times, the UK and the United States. In the morning, the UK will present data on consumer price inflation for October, and the US will publish its October data on inflation in the middle of the day. Analysts expect annual inflation in the UK to rise from 1.7% to 1.8% in October, while in the US October annual inflation remained at the September level, and its rate was 1.7%, as in September. For the UK, the annual inflation rate of 1.7-1.8%, although below the 2% target, is acceptable, especially against the background of the expected, not without negative forecasts of the Bank of England, the deterioration of the economy after Brexit. That is, the Bank of England, even if the inflation rate for October will remain at 1.7%, with a high probability will not do anything with the interest rate.
For the United States, the inflation rate of 1.7% per year is somewhat low. Therefore, if inflation for October suddenly turns out to be lower than analysts predict, it is possible that the Fed in December may go for the fourth interest rate cut this year. However, we consider such a scenario less likely than keeping the federal funds rate unchanged in December.
On Thursday, November 14, data on Japan’s GDP growth in the third quarter of 2019 will be released in the morning. Analysts are already predicting a slowdown in the Japanese economy in the quarter from 0.3% in the second quarter to 0.1% in the third quarter, and from 1.3% in the second quarter to 0.4% in the third quarter. Japan’s economic growth continues to slow this year, not least from China’s slowdown. So the Japanese yen may have reason to weaken in the short term.
Next week should not be left unattended and other significant events:
· Data on the UK labour market for September and the last three months (Tuesday, November 12, at 12:30 GMT).
· The speech of the head of the US Federal Reserve Jerome Powell in Congress (Wednesday, November 13, at 19:00 Moscow time).
· The second estimate of the gdp growth rate of the eurozone in the 3rd quarter of 2019 (Thursday, November 14, at 13:00 GMT).
· Retail sales in the U.S. for October (Friday, November 15, at 16:30 MOSCOW).
Our forecast for the next week rate is in the range of 63-64.5 rubles, and the rate – in the corridor 70-72 rubles.
Natalia Milchakova, Deputy Director of Alpari’s Analytical Department