BoE, BoJ Takes Center Stage as New Fed Chair Emerges this Week

The bulls were all blazing for the dollar all through the prior week. The approval of 2018 budget at the senate signaled renewed drive towards the achievement of President Trump's tax reforms before the end of the year. This together with speculations surrounding who to assume the position of the next Fed head had the dollar on an upward reel. Announcement of the new Fed chair along with the US major jobs data (non-farm payroll) comes in on Nov 3rd, while a FOMC meeting will hold on Nov 2nd. The FOMC meeting won't be eventful as rates are not expected to go up till December. Jerome Powell seems to be favoured as the next Fed Chair, this may not seat well with investors as their eyes are set on John Taylor who is more on the hawkish side.

Analysts have forecasted a rise in non-farm payroll to 311,000 following the drop to 33,000 the prior month. All of these will weigh heavily on the performance of the dollar in the coming week.

European Central Bank's decision to cut down its Asset Purchase Program (APP) by half and at the same time suggesting it will come to the market's aid if there be signs of a reversal effect on the Euro-area's economy sent the Euro on a downward spiral as investors perceived it as dovish. The Euro sank to record low of 1.1609 against the dollar. The new week is laced with final manufacturing PMI from all across Europe. 8am today will see the release of Germany's retail sales & m/m CPI numbers, Spain will also release its y/y CPI & q/q GDP by 9am, this should set the tone for the EURO as the week commences.

Spain in the course of the weekend implemented article 155 on Catalonia, taking over all forms of authority and setting Dec 21 as the date for elections in the region. This comes after the region's autonomous authority declared Independence. The Spanish government is now in charge of the region's police force and civil service. Spanish prosecutors meanwhile plan to start pressing rebellion charges against Carles Puigdemont and his ousted government, these charges carry a 30 year jail term. The problem remains internal but heightened tensions will not go well for the Euro.

GBP has a busy week ahead with different economic data due for release. All eyes will be on the Bank of England's meeting scheduled to hold on Thursday. This would definitely take the Shine off the FOMC meeting as policymakers are divided on whether or not there should be a rate hike. A rise in UK's inflation to 3%, 1% above the apex bank's inflation target advances the case for a rate hike but low consumer spending as shown in recent economic data signals a rate hike might be a little premature.

News coming in the course of the weekend notes the EU is shifting focus away from Brexit to concentrate on more pertinent issues coming up in 2019, such as the European Parliament's elections. This is considered a positive for Brexit as it will make it politically easier for the assembly to approve any deal on the terms of Brexit.

Aussie, Kiwi & Loonie all bowed to the power of the dollar in the past week. Unimpressive jobs data from Australia, investor’s low confidence in New Zealand's new government and dovish stance of the Bank of Canada had all three currencies in investor’s black book. Australia's trade balance, retail sales & China's manufacturing data if positive could change investor's sentiment towards the AUD. Employment data from Canada and New Zealand are economic data on investors mind for both currencies this week. Indications of an improving labour market in New Zealand may give support to the NZD in the course of the week.

The Bank of Japan (BoJ) will also take center stage this week. Expectations are that it will continue with its economic expansionary stance as inflation is still below 1% giving life to threats of deflation. Retail sales released during the Asian trading session improved to 2.2% but dropped 0.1 percentage points below analyst forecast. The Yen will remain weaker against other currencies given policy divergence even as the Japanese economy gains momentum.

The Asian trading session was uneventful given low volumes in the market.

Gold prices remained below 1,300 as dollars gained momentum in the prior week, while Brent crude reached a high of $60 as OPEC plans to extend oil production cut beyond March 2018 with backing from Saudi-Arabia and Russia.