· The tragic events in Paris are set to dictate price action at the beginning of the week in Europe
· The US sees an increase in tier 1 data this week as well as the release of the minutes from last month’s Fed meeting
Unfortunately the state of play in Europe, at least at the front end of this week, is likely to be dictated by the tragic events seen on Friday in Paris , whereby coordinated deadly terrorist attacks took place and left at least 129 people dead and hundreds wounded. In terms of the consequences on financial markets of these attacks, the beginning of the week could see a flight to safe havens, while analysts suggest the EUR is set to weaken against major counterparts amid the uncertainty going forward. In turn, analysts are also anticipating weakness throughout European equity markets, with analysts quoted in The Times suggesting that France could be led into a recession on the back of the attacks, while retail sales are likely to fall as shoppers fear becoming a target and the ECB will now feel they have little choice but to expand quantitative easing given the likely downward pressure in terms of both sentiment and economic performance.
Separately, in terms of key data from the Eurozone, this week is scheduled to see the release of Eurozone CPI and German ZEW survey. Across the Channel, the UK is also set to see the latest CPI release on Tuesday, with many participants keeping a particularly close eye on the release given the BoE’s most recent somewhat downbeat Quarterly Inflation Report at the beginning of the month, which saw the central bank forecast CPI remaining below 1% until H2 of 2016. As such, not only would a low reading on Tuesday show a negative outlook of the economy ahead of next Wednesday’s Autumn Statement from Chancellor of the Exchequer Osborne, but could see a further push back in BoE rate hike expectations, while a better than expected reading could have the opposite effect and see BoE rate hike expectations brought forward.
Over in the US, after a relatively quiet week last week which saw the Veteran’s Day holiday on Wednesday, this week sees a pickup in tier 1 data, with the likes of CPI, industrial and manufacturing production, Philadelphia Fed business and Empire State manufacturing release as well as the minutes from the latest Fed meeting. It’s worth noting that with many market participants now pricing in a rate hike in December from the FOMC, focus on this data is likely to fall on whether it is bad enough to push back a rate hike, with less than usual focus on how it compares to expectations.