Happy Monday, traders.
What looks at first glance like a potentially frenetic week on the data and headline calendar is actually setting up to be rather subdued. The big hitters—the US midterm elections and an FOMC rate decision—are all but settled and priced into the markets, leaving little room for USD or gold price volatility; and even so, both events will have enough gravitational pull around them to draw attention away from the other data points in a sparse week of releases. While there will always be some noticeable price-action and momentum in Dollar and precious metals markets at the moment of major events like these (thank you, HFT and algos,) this week is unlikely to see any major change to recent range-bound trends.
Just as currency and precious metals markets can expect a mostly low-impact week in the US, the economic calendar outside the States can be considered no-impact for this week.
Let’s take a look.
The Midterms (Tuesday, November 6)
Market consensus for this week’s midterm election—Democrats to flip the House while the Republican party narrowly control of the Senate—is largely neutral for the US Dollar outlook and therefore for gold as well given that a split Congress greatly decreases the probability of any meaningful legislative action in the near- or medium-term; further fiscal policy changes (like tax-cuts) and large infrastructure bills become much less likely, and the White House’s aggressive trade policies will have to mellow a bit.
Realistically, even an unexpected result on Tuesday means little for the markets or the US economy short-term. Should the GOP remain in control of both houses there would be a possibility of further fiscal stimulus, while a Dem-dominated legislature might see an adjustment to the current course of healthcare legislation; but neither of these outcomes should have enough impact to substantially boost or curb growth in the US.
Despite all the partisan fireworks going on outside of the numbers, the largest impact that the 2018 midterms will have on gold pricing this week will be to draw focus and mute gold’s (and the dollar’s) reaction to any individual release.
US Economic Data to Watch
Monday, November 5 at 10am EST // ISM non-manufacturing PMI
[consensus expected: 59.2 / previous: 61.6]
As mentioned before, the US midterm elections this week should leave us with some muted reactions to the already light slate of economic data. Still, it’s worthwhile to stay cognizant of this and similar measures of the US economy in order to anticipate any shifts in the larger macro trends that impact gold pricing. To that end: like many US economic indicators, service-sector conditions have remained strong, and reached a cyclical high in September so even a larger-than-expected correction from that high-point should not be enough to dampen confidence this time out. That said, should October’s non-manufacturing PMI disappoint on Monday there will be that much more interest on November’s number to see if the USD’s economy could be entering a downward trend.
Thursday, November 8 at 8:30am EST // Initial Jobless Claims
[consensus exp.: +214k / previous: +214k]
This week’s jobless claims number is largely expected to remain close to the recent baseline of 200k new claims per week. This should remain the case until we reach holiday-hiring season for retail, barring any significant meteorological events or major shocks to the US economy. It’s been quite some time since jobless claims was a weekly appointment for any gold trader, but as we move through the later part of the current economic cycle, the likelihood that it will return to being a need-to-know number once again means it worth at least keeping an eye on.
Thursday, November 8 at 2pm EST // FOMC Int. Rate Decision
Even though at this point in the cycle forward guidance makes it so the market is almost always correct in it’s prediction about what the Federal Reserve will do following a given meeting, it’s still rare to have the consensus described as “universal,” but that’s just what we’re seeing this week as odds of an interest rate hike are effectively at zero. Still, eyes will be on the committee’s statement with the expectation that it will firmly set the table for another 25bp hike at the December meeting; there will also be some interest in how the FOMC views the global equity markets’ recent stumbles although the continued strength of US data ensures that there shouldn’t be any meaningful changes to the Fed’s outlook.
Friday, November 9 at 10am EST // U of Michigan Consumer Sentiment (prelim.)
[consensus exp.: 98 / previous: 98.6]
Like the PMI numbers on Monday, Michigan’s consumer sentiment read is expected to continue supporting the narrative of a stable and growing US economy, while any surprises to the downside will likely be washed out by the residual noise of Tuesday’s midterm elections and Thursday’s FOMC statement.
That’s all for this week, traders. Check back on Friday for our recap of the week’s trading.
Good luck out there.