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Week ahead – highlights include Italy Elections, US PCE, EZ CPI, China PMIs

  
  Analysis
  • MON: Japanese Flash PMIs (Sep), German Ifo (Sep), US National Activity Index (Aug), German Prelim. CPI (Sep), Canadian Business Barometer (Sep).
  • TUE: NBH Policy Announcement; Chinese Industrial Profit (Aug), EZ M3 (Aug), US Building Permit Revisions (Aug), Durable Goods (Aug), Consumer Confidence (Sep), New Home Sales (Aug), Richmond Fed (Sep).
  • WED: BoJ Minutes (Jul); Australian Retail Sales (Aug), German GfK (Oct), Swiss Investor Sentiment (Sep), US Pending Home Index (Aug).
  • THU: Banxico Policy Announcement, Riksbank & CBRT Minutes (Sep); EZ Consumer Confidence Final (Sep), US GDP Final (Q2), IJC (w/e 19th Sep), Canadian GDP, UK GDP (Q2).
  • FRI: Japanese Unemployment (Aug), Chinese NBS & Composite PMIs (Sep), German Import Prices (Aug), Retail Sales (Aug), Swiss KoF (Sep), German Unemployment (Sep), EZ Flash CPI (Sep), Unemployment (Aug), US PCE Price Index (Aug).

NOTE: Previews are listed in day-order

Italy Elections (Sun):

If polls hold true, the Centre-right coalition will comfortably secure a majority and likely be led by Brother’s of Italy’s Meloni. Note, the coalition has seen a slight dip in recent polling though remains on track for an outright majority of seats, despite being at around 45-48% of the vote. The coalition holds strong stances on increasing the deficit, easing the tax burden and lessening legislation (among other areas) to the benefit of domestic business. With regards to the EU, Meloni has committed to sticking to the Recovery and Resilience plan and has echoed Former PM Draghi in prudent language around the budget deficit alongside denouncing the Russian activity and pledging to support Ukraine; steps that have, incrementally, reduced the market-perceived risk of a Meloni government (evidenced via BTP-Bund, at the time). Although, it remains unclear as to how much influence The League’s Salvini and Forza Italia’s Berlusconi will have within the coalition and as such on government policy, thus keeping the “right wing” leadership market risk very much in play.

CBRT Minutes (Thu): (more…)

USD/CNY pushes past 7.10 as yuan decline extends further

  
Analysis, Forex
The latest fixings from the PBOC are also angling towards a further weakening in the currency, even if they did not officially go past the 7.00 mark as of yet. The USD/CNY fix today was seen at 6.9920.

What will be interesting is that now it looks like we may see the yuan fall further to test the lows (highs for USD/CNY) from September 2019 and May 2020 close around the region of 7.15 to 7.18. A break above that will see the yuan fall to its lowest ever since China chose to abandon its old peg against the dollar and revalue the currency.

As much as markets might be focused on other major events and moves this week, the continued depreciation in the yuan is also a notable development that warrants attention. In turn, this just provides yet another tailwind for the dollar in the grand scheme of things.

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