5 Key Events to Watch Next Week

With summer unofficially ending for those of us who live in the Northern Hemisphere, and not too far ahead for the 10% of you who don’t, we’ve made it through another week of Miley Cyrus’s tomfoolery, USD/JPY capped below ¥100, and a lack of cruise missiles being volleyed at tall, British-educated ophthalmologists in Damascus (so far). Here’s what we’re watching next week:


1. Syria and the Great Waiting Game

UK Prime Minister Cameron was the first sitting British leader since 1782 to seek military approval from Parliament, and lose the vote. A mere thirteen votes separated the ‘ayes’ and ‘nays’ in a result that could set back US-UK relations and hamper Cameron’s re-election chances in 2015. More immediately, however, this means the US may have to unilaterally send a military message to Syria boss Assad. France appears to be the only other “major” supporter of action against Syria, and whilst some may be waiting for the punchline, we’re astute to know how important France was militarily to our friends in America, so we won’t go there (for now). Suffice to say, it was a week of ‘risk on/ risk off’ in many asset classes. Brent crude tested US$ 116.40 this week and then got as low as $112.62 while Gold found a bid all the way up to $1433 before retreating to $1392. Let’s see if Obama – and Hollande – surprise us (and Assad) this weekend.


2. Beige Book (or is it maize?)

We are about three weeks away from the learning whether or not the FOMC votes to taper the Fed’s quantitative easing policy. As Richmond Fed President Lacker noted late this week, even if the Fed does decide to taper, it simply means the Fed will be reducing – and not eliminating – stimulus. Primary dealers by and large believe that the Fed will reduce monthly asset purchases by about US$ 10 billion from their current pace of US$ 85 billion. That’s a lot of monthly balance sheet for the MBS market, but perhaps it’s a good thing that the Fed may not end up owning every single Fannie and Freddie in the secondary market, eh? Next week’s Beige Book will provide us with the Fed’s latest assessment of economic conditions and will be closely scrutinised for any details about Team Bernanke’s latest thinking regarding timing of the taper.

3. Central Banks en masse

Major central banks will conduct policy meetings next week en masse, and this makes for some very late nights and early mornings for those of us whose next heartbeats are rhythmically-attuned to monetary mandarins. We think we all have a pretty good sense about what’s going to happen: the RBA will keep rates at 2.50% and talk down A$; BoC will keep rates steady at 1.00% and will make its displeasure with Canadian economic progress known; BoJ will likely keep its 2014 monetary base target unchanged at ¥270 trillion but will register dissatisfaction with where JPY is trading; BoE will tow the line at 0.50% after August’s momentous forward guidance; and the ECB will keep rates unchanged at 0.50% in a snoozer and try to fend off criticism on its style of asterisk-less forward guidance, much to the consternation of Buba.

4. Freaky Friday

In what is looking like it will shake out as one of the busiest Fridays since the epoch before we could spell the name ‘Kardashian,’ we’ll be focused on BoJ’s Monthly Report, a boatload of Swiss data, UK inflation expectations, Canadian labour market numbers, and of course, US August non-farm payrolls. We actually put more reliability and credence in Chinese economic data than the Fed’s monthly jobs report, which means next week’s Chinese August manufacturing PMI and August services PMI are of greater significance to us (and Glenn Stevens)…but the markets care about NFP, so we do, too. However the US Labour Department decides to embellish the jobs print next week, we’ll all be glued to it because of its repercussions for the mid-month FOMC taperfest “coming soon to a Fed district near you.”

5. Oh, Canada!

The C$ is about to turn in its worst monthly performance since August 2010. The last two things to look this sickly in Canada were the 1980 Winnipeg Jets and the 1989 Quebec Nordiques, but we digress. September is right around the corner, and perhaps the loonie will start out on a better skate, er, foot. GBP/CAD at C$ 1.65 and EUR/CAD at C$ 1.41 made more than a few portfolios happy this month.