Markets

Breakdown of the latest developments on the global exchanges
Nov 9, 2020, 7:19 AM GMT
#WeeklyExpectations

What to Expect This Week – GDP Numbers in Europe; RBNZ Rate Decision

Growth Numbers in the Eurozone Could Be Revised on Friday

Following the turbulent and quite eventful previous week, the next five market days are expected to be quite tame in comparison. The most important economic release will be Eurostat's Flash GDP data for the third quarter, which could have far-reaching consequences for the future of Eurozone's tentative recovery.

Flash GDP reports cover the same period as the preliminary GDP reports, which are typically published about twenty days earlier. The last such preliminary numbers demonstrated a 12.7 per cent rebound from the 11.8 per cent slump that was reached at the height of the coronavirus crash in Q2.

Hence, the importance of Friday's report is manifested by its ability to either confirm or revise this seesaw rebound in the Gross Domestic Product. If the market forecasts are not realised, and Eurostat is forced to revise down the previously recorded 12.7 per cent growth, this would spell further problems for EU policymakers.

Government restrictions were quite relaxed during the summer months, and the general economic activity was allowed to pick up then. However, if it is proven that this resulted in weaker growth than initially projected, the economic crunch would certainly deepen in Q4 in light of the sweeping coronavirus wave that has gripped much of Europe.

Moreover, the protracted Brexit woes could further exacerbate the fallout on Europe's strained capital markets, which would mean even more troubles for the euro.

RBNZ Next in Line to Deliberate on its Official Cash Rate

The Monetary Policy Committee (MPC) of the Reserve Bank of New Zealand is meeting this Wednesday to assess the most recent changes in the underlying economic conditions.

According to the initial market forecasts, the near-negative Official Bank Rate is projected to remain unchanged at 0.25 per cent. However, the Committee could decide to broaden its Asset Purchase Facility, similarly to what the Governing Council of the RBA did recently.

At any rate, the ultimate decision of the MPC is likely to be yet again primarily inspired by the historical GDP contraction that was recorded in the second quarter.

Preliminary GDP Data in UK Set to Boost the Pound

The other important Gross Domestic Product release scheduled for this week is going to cover the British growth rate for the third quarter. The Office for National Statistics is set to publish its own findings on Thursday.

The early market expectations project another seesaw rebound in the wake of the initial coronavirus crash in Q2, similarly to what was observed in the Eurozone. This particular report, however, is going to provide preliminary GDP numbers, which is why its impact on the market is going to be more significant.

According to these consensus forecasts, the recorded GDP growth rate in Q3 should reach 15.6 per cent, which would make up for most of the 19.8 per cent crunch that was observed in the second quarter.

If these expectations are realised on Thursday, the sterling is likely to receive a short-term respite. Even still, the currency's broader struggles remain quite persistent.

As can be seen on the 4H chart below, the EURGBP is once again set on course to appreciate in the near-term after the pair was able to break out above the major support level at 0.90150.

The underlying price action is currently concentrated in a tight range spanning between the above-mentioned support and the major resistance level at 0.91000.

Given the expected surge in trading activity stemming from the GDP numbers released in Britain and the Euro Area, the price action is likely to rise towards the resistance level next.

Other Prominent Events to Watch for:

Monday – BOE Governor Bailey Speaks.

Tuesday – Chinese y/y CPI data; UK Unemployment Rate.

Thursday – Harmonized CPI Germany.

Friday – USD Consumer Sentiment.