Monetary Policy Decisions due in the U.S., U.K and Japan, U.S. Non-farm Payrolls Awaited

U.S. shares climbed on Friday, boosted by a surge in the tech sector and bullish economic growth. At the close in NYSE. The NASDAQ Composite index soared 2.2 percent, the S&P 500 index gained 0.81 percent and the Dow Jones Industrial Average edged 0.14 percent higher. All three U.S. stock benchmark indices closed at record levels.

The rally in technology sector came after four of the most valuable tech companies in the world, namely Amazon, Google parent Alphabet, Microsoft and Intel easily beat market expectations for profit and revenue in their third-quarter reports. On Friday, shares of Alphabet jumped 4.26 percent, shares of Microsoft rose 6.41 percent, shares of Apple advanced 3.58 percent while those of Intel soared 7.38 percent.

However, standout performer was Amazon whose shares took off by 13.2% to close above $1,100 for the first time in its history. The surge resulted from the e-commerce giant’s earnings report that showed earnings per share of 52 cents, well above Wall Street estimates of 3 cents a share.

U.S. stock markets were also boosted after the Commerce Department on Friday reported that the U.S. economy expanded at a solid 3% annual pace for a second straight quarter in spite of damages from two hurricanes. The reading blew analysts’ forecast calling for the report to show the economy grew at a 2.5 percent pace in the third quarter.

Furthermore, the University of Michigan published the final reading of its consumer sentiment index for October that soared to 100.7 from September’s 95.7. The figure was slightly lower than the preliminary reading of 101.1 and economists’ expectation for a revised reading of 100.8 but recorded the strongest level in 13 years.

The dollar ticked higher against a basket of major currencies on Friday with the dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, climbing 0.39% to 94.92.

In the week ahead, market participants are set to be busy with both Fed monetary policy meeting and economic data especially the U.S. non-farm payrolls. The Federal Reserve is widely anticipated to leave interest rates unchanged at its meeting on Wednesday as the meeting will not be followed by a press conference. The Federal Open Market Committee is likely to wait till December to lift rates.

The economic data that draws market’ attention the most is the US nonfarm payroll report for October scheduled to be released on Friday. Analysts expect the report to show the world’s largest economy added 300,000 new jobs in October after having shed jobs for the first time since 2010 in the previous month due to weather disruptions from a string of hurricanes.

Meanwhile, average hourly earnings figures are expected to rise 0.2 percent on October and jobless rate is forecast to remain unchanged at 4.2 percent.

Before the employment report, the Institute for Supply Management is to release data on manufacturing and non-manufacturing sectors on Monday and Wednesday, respectively.

Like the Federal Reserve, the Bank of Japan is not expected to make any changes to its monetary policy as well as its current inflation forecasts at the conclusion of its two-day rate review on Tuesday.  BOJ Governor Haruhiko Kuroda is due to hold a press conference afterward to discuss the decision.

Turning to the euro, the single currency fell to a more than 3-month low of $1.1586, sending the pair EURUSD down 0.57 percent on Friday. The euro lost ground versus all of its major rivals after ECB President Mario Draghi provided details on the central bank’s plan to reduce stimulus. The central bank decided to slash its bond purchases in half to 30 billion euros a month from January. However, ECB will extend bond buying to at least next September in response to continuously low inflation.

The British Pound also closed lower on Friday, down 0.25 percent to trade at $1.3127. Figures released by the Office for National Statistics on Wednesday showed Britain’s economy picked up speed unexpectedly in the third quarter.  Data showed Q3 gross domestic product growth jumped by 0.4 percent, which is higher than both the 0.3 percent growth in the three months to June 2017 and market forecast calling for a growth of 0.3 percent.

Next week, the Bank of England is forecast to raise its bank rate from the current 0.25 percent to 0.5 percent at its policy meeting on Thursday.

Beside the rate decision of the BOE, markets will also focus on U.K economic data released next week which include readings on October manufacturing sector activity on Monday, a report on the construction sector on Tuesday and the service sector on Wednesday.

The manufacturing PMI is forecast to remain unchanged at 55.9 in the current month, construction activity is expected to advance to 48.9 from 48.1, while a survey on major sector services is forecast to decline slightly to 53.3 in October from 53.6 last month.

Turning to the Canadian dollar, the Loonie strengthened on Friday after a six-consecutive-session streak of declining. The currency recovered following a steady slide that came after the BOC kept interest rates unchanged at 1 percent as expected on Wednesday.

The central bank held rates following two straight hikes in July and September and claimed that although less stimulus will be required over time in response to the economy’s impressive run over the last four quarters, the BOC will be cautious given “substantial uncertainty” about the renegotiation of NAFTA as well as the Canadian dollar’s recent appreciation which might cause inflation to reach the 2-percent target a little bit later in 2018 than previously expected.

Next week, the Statistics Canada is to report data on the labour market on Friday.

The Australian dollar plunged to the lowest level in three-and-a-half month versus the greenback on Friday, down 0.22 percent and sending the pair AUDUSD to as low as 0.76250. The Australian Bureau of Statistics (ABS) on Wednesday reported that Australia’s September quarter consumer price inflation (CPI) came in at 0.6 percent, which was well below the 0.8% rise expected.

Meanwhile, the trimmed mean CPI, the more important measure for inflation in terms of the outlook for interest rates, gained only 0.35 percent on quarter, bringing the annual rate to 1.88%. Market had expected a quarterly increase of 0.5% or a year-on-year rate of 2%. Weak inflation data put doubt into the Reserve Bank of Australia (RBA)’s rate hike forecasts for next year.

Next week, the Australian Bureau of Statistics is scheduled to report data on the country’s September retail sales amidst expectations calling for a rise of 0.5 percent following an unexpected decline of 0.6 percent in August.

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