Markets remained highly volatile in the last week as the conflict in the Middle East rolled into its third week and, although there has been some talk of negotiations over the last few days, both sides are expressing commitment to continue to fight.
News over the weekend that Iran is determined to keep the Straits of Hormuz closed and that President Trump is calling on allies to commit military resources to the region should see another nervous start to the week for investors.
In addition to geopolitical updates expected on an almost hourly basis this week, there is also a very full macroeconomic calendar for traders to deal with, including five key major central bank updates and several key data releases – volatility is not expected to calm anytime soon.
Here is our usual day-by-day breakdown of the major risk events this week:
Traders are expecting another lively start to the day, with updates over the weekend on the war in the Middle East again likely to lead to gapping on the Asian open. There is little on the calendar to move markets in the first two sessions of the day. However, CPI data out of Canada close to the New York open should see moves in the loonie, and the Empire State Manufacturing Index data out at the same time will give us more information on the state of the US economy.
We have the first of several key central bank updates in the Asian session on Tuesday, with the Reserve Bank of Australia set to update markets on its latest call. There is little of note in the London and New York sessions today; however, updates on the war are likely to keep markets lively as the day progresses.
It’s another quiet calendar day in Asia and Europe on Wednesday; however, things will liven up significantly once the New York session kicks off, with the day bookended by the two North American central banks’ interest rate calls. The Bank of Canada will make its announcement early in the day before a wait until near the end of the session for the FOMC’s big update. Prior to the BoC update, we also have US PPI data set to be released; however, expect the central bank updates to dominate.
It is possibly the biggest calendar day of the year for data on Thursday, with key releases due out and no fewer than three major central bank rate calls. The day kicks off with a big focus on the antipodes, with New Zealand GDP numbers due out before Australian employment data is released. Attention then moves swiftly north for the Bank of Japan’s interest rate call. The London session starts with UK employment data out, before focus moves to Switzerland for the SNB’s interest rate call. Attention then jumps back across the Channel for the Bank of England’s rate decision, before just over an hour later we hear from the ECB for their rate update. The New York session sees the release of the usual US Weekly Unemployment Claims data alongside the New Home Sales numbers.
Friday should bring some respite for traders, at least on the macroeconomic calendar. The Asian market may see a decrease in liquidity during the session as Japanese markets will be closed, while there is also little of note scheduled in the European session. The New York session sees the release of Canadian Retail Sales data; however, again traders are expecting geopolitical updates to provide another busy last session of the day to round out the week.
