The Week Ahead: 5 Things to Watch on the Economic Calendar

Investing.com - After a historic week in which U.S. politics dominated market sentiment, investors will get back to the business of watching the Federal Reserve and economic data in the days ahead as expectations mount for a December rate hike.

Elsewhere, Germany is to publish preliminary data on third quarter economic growth on Tuesday for further hints on the strength of the euro zone's economy.

Preliminary data on Japanese third quarter growth will also be in focus, amid concerns over recent yen strength and its implication on economic growth prospects.

Meanwhile, in the U.K., market participants will be looking ahead to reports on consumer prices, employment and retail sales for further indications on the continued effect that the Brexit decision is having on the economy.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. Fed Chair Yellen Appears Before Congress

Federal Reserve Chair Janet Yellen is due to testify on the economic outlook before the U.S. Congress Joint Economic Committee on Thursday at 10:00AM ET (15:00GMT).

Her comments will be monitored closely for any new insight on policy. The Fed left interest rates unchanged earlier this month, in a widely expected decision, but signaled it could hike in December as the economy gathers momentum and inflation picks up.

In addition to Yellen, traders will also pay close attention to comments from a handful of Fed officials also scheduled to speak throughout the week to see if they endorse the idea of a December rate hike.

Dallas Fed President Rob Kaplan, Richmond Fed President Jeffrey Lacker and San Francisco Fed President John Williams speak Monday.

Boston Fed President Eric Rosengren and Fed Vice Chair Stanley Fischer are on deck Tuesday.

Minneapolis Fed President Neel Kashkari, St. Louis Fed President James Bullard and Philadelphia Fed President Patrick Harker speak Wednesday.

On Friday, New York Fed President William Dudley, St. Louis Fed President James Bullard, Kansas City Fed President Esther George and Dallas Fed President Rob Kaplan are on tap.

Odds for a rate hike at the Fed's December 13-14 meeting currently stand at 81.1%, according to Investing.com's Fed Rate Monitor Tool.

2. U.S. October Retail Sales & Inflation

The Commerce Department will publish data on October retail sales at 8:30AM ET (13:30GMT) Tuesday. The consensus forecast is that the report will show retail sales rose 0.5% last month, after gaining 0.6% in September. Core sales are forecast to inch up 0.4%, after rising 0.5% a month earlier.

Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.

On Thursday, the Commerce Department will release October inflation figures at 8:30AM ET (13:30GMT). Market analysts expect consumer prices to ease up 0.4%, while core inflation is forecast to increase 0.2%.

On a yearly base, core CPI is projected to climb 2.2%. Core prices are viewed by the Fed as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.

Rising inflation would be a catalyst to push the Fed toward raising interest rates.

Besides the retail sales and inflation reports, this week's calendar also features U.S. data on initial jobless claims, building permits, housing starts, producer prices, industrial production, as well as surveys on manufacturing conditions in the Philadelphia and New York regions.

3. German, Euro Zone Q3 GDP

Germany will publish a preliminary report on third quarter economic growth at 07:00GMT (2:00AM ET) on Tuesday. The euro zone's largest economy is forecast to expand 0.3% in the July-September period, slowing from growth of 0.4% in the preceding quarter.

The euro zone will release revised third quarter growth data shortly afterwards at 10:00GMT (05:00AM ET). An initial estimate published late last month showed that the region's economy grew 0.3% in the three months ended September 30, unchanged from the second quarter.

4. Japan Third Quarter GDP

Japan will publish preliminary third quarter economic growth data at 23:50GMT (6:50PM ET) on Sunday. The report is expected to reveal that Japan's economy expanded by just 0.2% in the three months to September, maintaining pressure on policymakers to support the world's third largest economy.

5. U.K. CPI, Employment & Retail Sales for October

The U.K. Office for National Statistics will release data on consumer price inflation for October at 09:30GMT (4:30AM ET) on Tuesday. Analysts expect consumer prices to rise 1.1%, after increasing 1.0% a month earlier.

At 09:30GMT (4:30AM ET) Wednesday, the ONS will publish the monthly jobs report. The claimant count change is expected to rise by 2,000 in October, with the jobless rate holding steady at 4.9%. Wage growth including bonuses is forecast to rise 2.4%.

On Thursday, the ONS will produce a report on October retail sales at 09:30GMT (4:30AM ET), with analysts expecting an increase of 0.5%, following a flat reading in the preceding month.

The Bank of England held interest rates at a record-low 0.25% earlier this month, as was widely expected, but hinted it could raise rates in the coming months if inflation accelerates too quickly.

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US Presidential 2016 Result & Trump's Victory Speech

Donald Trump won the Presidency:

Electoral votes =  290 vs 232

Popular votes = 60,350,241 vs 60,981,118

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How Markets Will React to the Election - Your Cheat Sheet

Bloomberg compiled a cross-asset guide to how Wall Street strategists predict the markets will react in the event that Donald Trump or Hillary Clinton wins the presidency. We've also included a separate scenario on how they might move if the Democrats recaptured the Senate and the House of Representatives along with the presidency; a Trump victory likely entails that Republicans would keep control of both houses of Congress.

A caveat: this chart offers only a consensus view on each asset class as inferred after poring over research reports. Among individual strategists, there's an expansive variety of opinion.

Moreover, in some cases — chiefly, the U.S. dollar and Treasuries — the short-term market reaction to the outcome of the vote may differ materially from the medium-term projection, depending on the victor.

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US Presidential: A Review of The Latest Polls Heading Into Election Day

 Final surveys standing between both candidates: Donald Trump [230 votes] and Hillary Clinton [308 votes].

(Shockwave Flash plug-in is required for viewing)

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US Presidential Election LIVE Coverage

Tuesday, November 8

US Presidential Election 2016

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USD Lives Or Dies By US Presidential Election: 3 Scenarios

U.S. elections don’t normally elicit major market volatility but the problem in 2016 is that for the better part of this year, market participants did not consider a Trump victory realistic, and now that the election is too close to call, they are bailing out of U.S. assets and rushing to protect their portfolios.Regardless of your political leanings, it is hard to ignore the fact that investors fear a Trump Presidency. His foreign policy, trade ideas and plan to overhaul the Federal Reserve scare domestic and foreign investors alike and the general lack of specificity could mean a long period of uncertainty. Beyond the immediate impact, investors also worry that if markets sell-off and the U.S. economy slows, the Fed could forgo a rate hike in December, which would exacerbate the dollar's slide through year's end.

But what if Hillary Clinton makes history by becoming the first female president of the United States? The market’s reaction depends on the margin of her victory.

3 Potential Election Outcomes

• Scenario #1: Trump becomes President, Clinton accepts defeat.

The greatest market impact would be a Trump victory and a willing Clinton defeat. In this scenario, the U.S. will have a man with untested political skills and unknown policies in office. In this case, the biggest winners will be the euro, Swiss franc and Japanese yen while the biggest losers would be the U.S. dollarand Mexican peso. The Canadian dollar should also fall but its moves could be tempered by a weakening U.S. dollar.

• Scenario #2: Clinton becomes President, Trump accepts defeat

The greatest relief for foreign investors would be if Clinton becomes President and Trump willingly accepts defeat. She’s not without her own problems (and there are many) but the transparency of her policies and the continuity of stability would send the U.S. dollar sharply higher. In this scenario, the dollar and peso would rise against all of the major currencies with the biggest losers being the Japanese yen, Swiss franc and to some degree the euro. However she would need to win by an uncontestably wide margin and Trump would need to accept defeat, which he has suggested he will not do.

• Scenario #3: Trump/Clinton becomes President by narrow margin. Loser refuses to accept defeat.

The third scenario is the most likely. If Trump or Clinton becomes president by a very narrow margin and the loser refuses to accept defeat, the ongoing uncertainty would be extremely negative for the U.S. dollar, especially in the hours after the election. On a percentage basis, the greatest market volatility in financial assets (currencies, equities and commodities) will be in scenarios 1 and 2.

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How Does the US Election Affect the US Dollar?

An election year is often a time of uncertainty for societies that practice a democratic or parliamentary form of government. Issues facing the nation’s economy, judicial system, as well as future control over the government’s legislative branch in coming midterm elections make their way to the forefront during the presidential election cycle.

From a trading and investing standpoint, the basic rule of thumb regarding the marketplace of financial securities is simple: Traders and investors do not appreciate looming uncertainty. The US presidential elections provide a voracious debate upon the direction of the country, and more importantly, provide uncertainty unto the marketplace.

Equities, futures and forex markets are all interested in the relative strength of the United States dollar, and ultimately that strength is based upon the economic health of the nation as a whole. The US presidential election has a great bearing on the direction of the domestic economy, and the potential influence on the USD itself can be substantial.

ELECTION DAY TRADING

Election Day in the United States is the Tuesday following the first Monday in November. For the period dating back to 1792, the US Presidential Election Day was held as a national holiday. It was not until 1984 that the stock market was open on election day, with the reason being cited that the market provided a necessary service to the public.¹⁾ At the time, skeptics maintained that insider trading could become a major concern as political insiders could use exit polling data in order to take positions in economic sectors likely to be affected by the results of the election. Eventually, the skeptics’ cries were drowned out, and the policy of open trading on Election Day became the norm.

In the current electronic marketplace, all trading is open on Election Day. Forex markets are open during their regular hours²⁾, as is the CME Globex futures market, the NYSE andNASDAQ.

Although voting actively takes place during trading hours, the official electoral results are not available until Tuesday evening. The time lag effectively nullifies any potential impact of the election’s result upon the marketplace during peak trading hours. As information systems technologies have advanced, exit polling data has become readily available to anyone who wants to seek it out; thus, the threat of insider trading based upon privileged exit polling data is not as great as in previous decades.

PRESIDENTIAL ELECTION CYCLE THEORY

The impact of political events upon global markets can range from subtle, to substantial, to potentially catastrophic. One theory that attempts to establish a correlation between the result of US presidential elections and the valuation of equities is the “presidential election cycle theory.” In basic terms, the “presidential election cycle theory” is a belief that stock market trends can be predicted by the four-year presidential cycle.³⁾ The theory dates back to 2004 and was developed by market historian Yale Hirsch.⁴⁾

In practice, the presidential cycle theory breaks down the performance of equities according to the four-year presidential term. The first year after a new president is elected often sees weak performance in equities. During year two, the performance of equities shows a gradual increase, with years three and four showing the strongest returns. Many reasons for the appreciation of equities in years three and four have been cited, with popular explanations ranging from successful policy changes attributed to the new administration, to shrinking uncertainty facing the market in general.

Of course, much like everything to do with investing and trading, the rule can be fallible and an oversimplification. An example of the theory being ineffective occurred in the election year of 2008, with the Dow Jones Industrial Average posting an annual decline of 33.84%.⁵⁾ According to the theory, year four of the presidential term was to be the strongest year of the cycle, but 2008 fell dramatically short of the theory’s expectations.

An important caveat to the presidential cycle theory is that it is based upon four-year cycles and does not make special note of the final year of a two-term incumbent president. Since 1900, the S&P 500 has gained an average of 11.5% and has risen 83% of the time in year four of a presidency. However, over the same time period, the S&P 500 has fallen by 1.2% in year eight of a two-term incumbent president, with the market posting gains only 44% of the time.⁶⁾

The presidential cycle theory exists as only one part of the overall picture regarding the future strength of equities, and indirectly, the future strength of the United States dollar. Much like all indicators, the theory has its advocates and detractors, with most investors and traders respecting the theory as a timing device by which to enter or exit the market.

ANTICIPATION OF NEW MONETARY POLICY: PRE ELECTION MARKET MOVES

The “strength of the US dollar” is a popular topic within the campaign trail rhetoric of nearly all candidates running in the presidential election. Promises of job creation, national debt reduction and the creation of a strong national economy are often the vehicles by which a candidate promises to deliver a strong dollar. It is true that both the Republican and Democratic parties agree that a strong dollar is in the best interest of the country. However, the means of achieving this goal are very different.

MONETARY POLICY: REPUBLICAN PARTY

Fiscal conservatism is the calling card of the Republican Party, with proposed monetary policy centered on national debt reduction and job creation within the private sector. The potential election of a Republican candidate is oftentimes construed as being a precursor to business-friendly legislation, lower taxation and a tightening of government spending.

In the midterm elections of 2014, the Republican Party was expected to take control of the United States Senate and introduce legislation that would contest the United States Federal Reserve’s policies of low interest rates and quantitative easing practices. During the days leading up to the election, and in anticipation of the election’s result and potential shift in policy, the USD traded at multi-year highs against the euro, Swiss franc and Japanese yen.⁷⁾Albeit an isolated example, and far from a concrete correlation, the mid-term elections of 2014 do illustrate the relationship between party politics and monetary policy facing the USD. As polling data became more concrete in the days before the election, traders found reasons to buy US dollars, expecting a tightening of interest rates and a long-term appreciation of the currency.

MONETARY POLICY: DEMOCRATIC PARTY

On the opposite side of the United States’ political aisle is the Democratic Party, with monetary policy objectives centered on public sector job creation and increased governmental spending. Support for legislation concerning issues such as universal health care, education entitlements and extensive public works projects can all be attributed to Democratic governmental policy. Investors and traders are oftentimes bearish on the potential election of Democratic leadership, due to the widespread association of the Democratic Party to principles of socialism, large government and higher corporate taxation rates.

The 2012 presidential election provides an illustration of market conditions during an election in which a Democratic candidate comes out on top. The hotly contested election was often seen as a toss-up by political experts, and the currency markets showed just how uncertain the “experts” were. Tight yearly ranges, with modest variation in exchange rate valuations, were prevalent in EUR/USD, USD/CHF and USD/JPY.⁸⁾ The somewhat-static market conditions facing these major US dollar pairings are often cited to be the result of an upcoming period of uncertainty, and a trading strategy of “sit and wait” being adopted by traders and investors.

Over the course of 2012, many individual trading sessions involving the USD majors were volatile and chaotic. However, when compared on a yearly basis to non-election year returns, the trading ranges of USD majors for the year 2012 could be characterized as relatively tame.

SUMMATION

The trading of USD major pairings in the run up to the 2014 midterm election and the 2012 presidential election can be useful when examining just how different USD valuations can behave when facing different election-year situations. Essentially, forex traders and investors can behave in nearly unpredictable ways when faced with the uncertainty of an election’s outcome. Sometimes they are content to sit and wait, while other times the trading opportunity appears too good to pass up.

At the end of the day, economic complexities surrounding the dollar’s valuation will be the driving force behind a sustained rally or prolonged downtrend. According to the presidential cycle theory, equities are likely to stagnate in the short term following an election, which could certainly hamper any uptrend in the value of the dollar. Ultimately, the US dollar’s long-term value is dependent upon many different factors, and the election year may just provide a few obstacles in the road rather than a complete change of course.

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LIVE 2016 US Presidential Debate 3/3 - Donald Trump vs Hillary Clinton

LIVE US Presidential Debate

Donald Trump vs Hillary Clinton

The Third Presidential Debate 2016 is at 9:00 PM - 10:30 PM (ET) on

Wednesday, October 19

[9.00am - 10.30am MYT, Thursday, October 20]

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The Week Ahead: 5 Things to Watch on the Economic Calendar

Investing.com - In the week ahead, market players will be focusing on the outcome of Thursday’s European Central Bank meeting for fresh clues on the future path of the region's massive stimulus program.

Elsewhere, China is to release what will be closely watched third-quarter growth data amid ongoing concerns over the health of the world's second biggest economy.

U.S. inflation data will also be in the spotlight, as investors attempt to gauge if the world's largest economy is strong enough to withstand an increase in borrowing costs before the end of the year.

Meanwhile, in the U.K., market participants will be looking ahead to reports on consumer prices, employment and retail sales for further indications on the continued effect that the Brexit decision is having on the economy.

Currency traders will also be awaiting a central bank decision in Canada on Wednesday.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. European Central Bank Policy Meeting

The European Central Bank's latest interest rate decision is due at 11:45GMT (7:45AM ET) on Thursday, with most of the focus likely to be on President Mario Draghi's press conference 45 minutes after the announcement.

The ECB is not expected to move on rates, but Draghi could offer fresh clues on the time frame of its €80 billion monthly asset-buying program, due to run out in March.

A recent Reuters poll of economists showed that a stable but lackluster economic outlook will push the ECB to extend its stimulus program by year-end, although such a move will likely be reserved for December’s meeting when the central bank’s updated quarterly projections will be available.

2. China Q3 GDP

China is scheduled to release data on third-quarter gross domestic product at 2:00GMT on Wednesday (10:00PM ET Tuesday). The report is expected to show the world's second largest economy grew 6.7% in the three months to September. The economy grew by a similar amount in the second quarter and if confirmed, it could be a sign that growth in China is finally bottoming out.

The Asian nation will also publish data on September industrial production, fixed asset investment and retail sales along with the GDP report.

3. U.S. Inflation for September

The Commerce Department will publish September inflation figures at 8:30AM ET (12:30GMT) Tuesday. Market analysts expect consumer prices to ease up 0.3%, while core inflation is forecast to increase 0.2%.

On a yearly base, core CPI is projected to climb 2.3%. Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.

Rising inflation would be a catalyst to push the Fed toward raising interest rates.

4. U.K. CPI, Employment & Retail Sales

The U.K. Office for National Statistics will release data on consumer price inflation for September at 08:30GMT (4:30AM ET) on Tuesday. Analysts expect consumer prices to rise 0.9%, after increasing 0.6% a month earlier.

At 08:30GMT (4:30AM ET) Wednesday, the ONS will publish the monthly jobs report. Theclaimant count change is expected to rise by 3,000 in September, with the jobless rateholding steady at 4.9% in the three months to August. Wage growth including bonuses is forecast to rise 2.3%.

On Thursday, the ONS will produce a report on September retail sales at 08:30GMT (4:30AM ET), with analysts expecting an increase of 0.3%, following a drop of 0.2% in the preceding month.

The Bank of England kept monetary policy on hold last month, but indicated that it could cut interest rates again as soon as November in a bid to buffer the economy from a 'hard Brexit'.

5. Bank of Canada rate decision

The Bank of Canada's latest interest rate decision is due at 10:00AM ET (14:00GMT) on Wednesday, with most experts expecting the central bank to stand pat on rates.

Still, with energy prices persistently low, global trade generally weak, and U.S. demand relatively soft, Canadian rates are likely to stay low for even longer than earlier thought.

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