Next week starts on Sunday, at least for German voters, who are asked to cast their vote in the federal election. Opinion polls point firmly to Angela Merkel retaining the chancellery, to which CIO attaches a 90 percent likelihood.
CIO expects the short-term market reaction to be somewhat muted. But CIO sees important implications in the medium to long term with respect to the speed of European integration and the development of its institutions, depending on the CDU/CSU’s future coalition partner.
For the rest of the week, a range of sentiment and inflation releases are worth monitoring, as well as the final readings for US and UK 2Q17 GDP. The US’s bounce back from a weak first quarter will likely be confirmed, while growth slowed in the UK.
In New Zealand, the central bank will decide on the policy rate on Wednesday, but no change is expected. In emerging markets, CIO sees policy rate decisions in the Czech Republic, Thailand, and Mexico. The Czech National Bank is the first one in its region to have started a hiking cycle, but market expectations currently point to the next hike only in November. In Mexico, Banxico ended its tightening cycle after 400bps of hikes, but it maintains a vigilant stance. Finally, China’s Caixin manufacturing PMI will provide the first indication of sentiment in emerging markets, before the global PMI releases on October 2nd.