• Wake of US Presidential election likely to impact market sentiment
  • Forward looking Eurozone Economic Sentiment reading tipped to show bleak outlook
  • UK Unemployment for September expected to rise but still be flattered by government support

A comparatively quiet week lies ahead in terms of macroeconomic data, but given there’s every chance markets will still be trying to pick through a long tail on the US Presidential election, the limited distraction may be no bad thing. German Trade Balance data for September will kick off proceedings and with the print could push out to an all-time high of close to EUR28 billion. Whilst that can in part be explained away by pent up demand from the COVID-19 lockdown, such a strong print also has the ability to reignite debate across the currency bloc over Germany’s continued dominance.

Tuesday sees the focus switch to the UK with the Unemployment Rate for September set to move higher once again. 4.9% is eyed and it needs to be taken in the context of ongoing government support for employers which is likely masking the extent of job losses which will be seen in the New Year. That’s a significant build on the 4.5% seen last month and anything above this level is likely to be cause for concern.

A useful forward looking indicator will also be published on Tuesday, with the Eurozone ZEW Economic Sentiment reading for November. Having risen steadily over the summer, this number started to decline in October and the forecast print of 27 will be the lowest seen since April. With many member states preparing for a long winter as they battle a resurgence of COVID infections, this sets the scene for yet more ECB bond buying, something that has the potential to keep the Euro weak.

After a quiet mid-week, Thursday sees the publication of the latest UK GDP data. The flash Q3 print will show a rebound, but given comments from the Bank of England last week which downgraded forecasts for the year, it would likely take something well above the estimated 15% to find much enthusiasm. For context, an annualised reading of around -12% is anticipated.

Also on Thursday, US Inflation data for October will be published and this is expected to show some very modest month-on-month growth. That would reverse a trend of recent declines although with the Federal Reserve inclined to add further stimulus and the new US Government – whatever that looks like – likely in a position to do the same, only a small uptick is necessary here.

Rounding off the week, Q3 Employment Data from the Eurozone will be published, with expectations that on a quarterly basis some improvement will be seen. Forecasts suggest growth of around 1.5%, although that needs to be taken in the context of the 2.9% fall posted in Q2. Failure to achieve more than 1% here would likely raise fresh cause for concern as the currency bloc braces for the prospect of more job losses over the winter.

US Producer Price Index data for October rounds off the week. This indication of the prices realised by producers is useful as it can act as a front runner for inflation. Expectations are that the month-on-month number will be meaningfully lower than the September print, something that in turn could put the Fed and government alike under fresh pressure to accelerate those stimulus plans.

Article by Tony Cross of Monk Communications. This article first appeared in Octo
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