Weekly Review And Upcoming Weekly Events Calendar

Tyler Durden's picture

Via Goldman Sachs

Week in Review

Japan intervenes Prime minister Naoto Kan successfully survived a party leadership challenge this week, which was greeted by the markets with additional Yen strength. In response, the government intervened to weaken the Yen, the first time the government has done so since 2004. $/JPY moved sharply from close to 83.00 before the intervention to above 85.00 for much of the rest of the week. As Thomas Stolper wrote in this week’s FX Views, in the event this “big-splash” intervention was successful because positioning was stretched and because the Yen is significantly overvalued against USD. That said, over the next 6 months the impact of QE2 in the US, persistent Japanese trade surpluses, and markets wanting to test the authorities’ resolve could result in marginal new lows below 79. In this case, more intervention is likely. The political environment is not supportive of Japan continuously intervening to defend specific levels as in the past.
Central bank meetings In India, the RBI hiked policy rates, and subsequent commentary from the central bank’s deputy later in the week signaled continued concern over inflation. The central bank of Chile also hiked as expected, while the Reserve Bank of New Zealand stayed on hold, also as expected, citing disruptions to economic activity from the earthquake earlier this month. The Swiss National Bank also kept policy on hold, but issued a very dovish statement that revised the inflation forecast down sharply, warning of possible negative inflation in early 2011, and pointed to slowing growth in 2011 as a result of the CHF appreciation.
EUR/$ up
In the markets, EUR/$ rose about 3% last week. This rise came amid renewed focus on the Euro zone periphery, with Irish CDS making new highs and the ECB reportedly buying small amounts of Irish debt. Rumors that Ireland will soon seek an IMF program and EFSF support were denied by the IMF, which does not envision Ireland needing financial assistance. More important in our view, the outlook for Spain continues to improve slowly, as Erik Nielsen has noted, with growth in Q3 not pointing to substantial weakness and banks scaling back slightly their dependence on ECB liquidity. The SPX strengthened about 1.5% for the week, while the VIX was flat.
Week Ahead

While we think the FOMC is likely to commence QE2 – another round of asset purchases – at some point later this year or early next, a resumption this Tuesday would be surprising given that the stream of data disappointments has abated and that the committee’s focus was still on the exit strategy only two meetings ago. Chairman Bernanke’s speech later in the week could shed additional light on the mindset of the FOMC.
Decoupling The Euro zone flash PMI for September will be closely watched, as a weaker-than-expected reading could reignite fears over growth prospects outside of the US and cast doubt over the de-coupling of the rest of the world from a weak US. Last month’s reading had come in lower than expected already after marking record highs during the summer. We expect only a very modest decline in the manufacturing PMI, from 55.1 to 54.9. An Irish debt auction on Tuesday also bears watching, given last week’s jitters over the Irish government’s market access.
Monday 20th
Canada wholesale sales (Jul) Consensus expects a rise of 0.1% mom, following on from a fall of -0.3% mom in June.
Tuesday 21st
Australia RBA minutes We look for evidence to support our revised rate forecast, which sees the RBA hike by 25 bps at its October meeting. We expect another 75 bps in hikes next year, which would bring the policy rate to 5.5%.
Canada CPI (Aug)
Consensus expects a flat reading mom, following the large rise of 0.5% mom in July on the introduction of the harmonized sales tax.
United States housing starts (Aug) Consensus expects a rise of 0.7% mom, following on from a rise of 1.7% mom in July. We expect a better-than-consensus reading at 3.0% mom.
United States FOMC While we think the FOMC is likely to commence QE2 – another round of asset purchases – at some point later this year or early next, a resumption this Tuesday would be surprising given that the stream of data disappointments has abated and that the committee’s focus was still on the exit strategy only two meetings ago.
Switzerland trade balance (Aug) In the context of the SNB’s dovish forecast revisions last week, in part due to CHF strength, it will be interesting to see whether (abstracting from monthly volatility) Swiss exports continue to trend higher in August.

Wednesday 22nd

Norway central bank meeting We see no change in policy stance from the Norges Bank, which is in line with consensus. We expect one more hike to 2.25% by the end of this year, and a further 125bps of tightening to 3.5% by the end of 2011.
UK Bank of England minutes
Canada retail sales (Aug) Consensus expects a rise of 0.6% mom, following the a rise of 0.1% mom in July.
Thursday 23rd
Euroland flash PMI (Sep) We expect a reading for the manufacturing PMI of 54.9, down slightly from a reading of 55.1 in August. Consensus expects a marginally bigger drop to 54.5.
Czech central bank meeting
We expect the CNB to remain on hold at 0.75%, in line with consensus.
United States initial claims (Sep 18) Consensus expects 450k, unchanged from 450k in last week’s reading.
United States existing home sales (Aug) Consensus expects a rise of 7.1% mom, up from a large drop of -27.2% mom in July. We expect a slightly weaker rebound at 5.0% mom.

Friday 24th

United States durable goods orders (Aug) Consensus expects a fall of -1.0% mom, following a reading of 0.4% mom in July. We are in line with consensus. Consensus for durable goods orders x/ transportation is for a rise of 1.0% mom, following a contraction of -3.7% mom in July.
United States new home sales (Aug) Consensus expects a rise of 6.9% mom, up from a large drop of -12.4% mom in July. We expect a slightly weaker rebound at 5.0% mom.
Bernanke speech
Fed Chairman Bernanke speaks at Princeton University, possibly shedding additional light on the mindset of the FOMC following the meeting earlier in the week.
Mexico central bank meeting Consensus expects Banxico to remain on hold at 4.5%.

Colombia central bank meeting Consensus expects the central bank to remain on hold at 3.0%, as do we.

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Goldenballs's picture

Every new week looks dodgier than the last.Comex on fire,QE2 imminent,who,s gonna bail out the bailer outers,Gold and Silver going up faster than a Saturn V Rocket.Anything can happen in a world living on the edge or in the case of the Government "Were busy doing nothing,working the whole day through,trying to find lots of things not to do........................ "

nirvana's picture

Indian markets within a kissing distance of ALL TIME HIGHS..


Go bitchez go ..

bigdad06's picture

Very exciting week! Can't wait! WHEE!!!:))

tom's picture

Especially the Colombian central bank meeting.

Josephine29's picture

So Ireland is a problem but lets skate over that and concentrate on Spain...I notice poor old Portugal who is in trouble too does not even rate a mention.


Pass the Kool-Aid.



Please reply to the questions regarding the timing and identity of the Irish bank assistance---your post had the wrong date and wrong bank?

Bolweevil's picture

"Harmonized tax" sounds so warm and cozy

Hunch Trader's picture

The market = front running the Fed. Other there isn't.

This is beyond sad.


Sucks_to_be_Smart's picture

Just wanted to chime in that these reviews/week ahead write ups are great!  Keep em coming from Goldman!  Short, sweet, to the point.  Everyone should already know which major indicators are coming out this week and every week, but I for one am not as good at tracking international economic data points and stories so this is great for me and i'm sure others as well!  Great early Monday read.  Thanks ZH!

ZackLo's picture

 Housing starts should be decent for august GOOD for september (everyone rushing to close the first time homebuyer tax credit)...then get ready for the bloodbath... I want to get my first house in january=)

Silverhog's picture

Ireland is stealing the show this week. I'm disappointed Spain is not trying hard enough. I was hoping to buy a Conde Hermanos guitar for $100 soon.

firstdivision's picture

...and futures are up on....what now?  Oh my bad, Ireland is imploding..again..and Portugal is looking like they are next to implode.  Wait, I forgot that the macro economy (China, India) looks great, yet the Baltic Dry rolled over and is falling.  Developed countries do not matter in the new economy, and from the looks of it, neither do developing countries.


This also gave me a chuckle this morning,

Yields on government bonds of Greece, Spain, Ireland and Portugalwill fall to within 2.2 percentage points of benchmark German bunds on average in the next two years from 4.61 percentage points last week, according to a Bloomberg News survey of 15 banks that trade directly with Germany’s debt agency. HSBC Holdings Plc, Europe’s largest bank by market value, Goldman Sachs Group Inc. and Societe Generale SA advise buying securities sold by Greece.

Bond dealers are confident that austerity measures will be enough to damp speculation the 16-nation currency union is in jeopardy of falling apart. Gross domestic product in the region will likely increase 1.7 percent this year instead of the 0.9 percent projected at the depth of the crisis in May, the European Commission said Sept. 13. Banks were given more time to raise capital levels to meet new regulations, reducing the likelihood they will need additional government aid.


Blano's picture

I'm kinda surprised ZH hasn't jumped on this one already.  If I missed it, sorry.  I found it quite chilling.



Silverhog's picture

I read that this morning as well. That is one scary senerio. They might as well do your tax returns for you while their at it.

Grand Supercycle's picture

DOW weekly chart shows key resistance around 10,700