Week ahead: Biden impeachment & US govt shutdown looms

After a furious week of central bank activity, it’s time to focus again on the economic data, whilst US political events are again important amid a possible government shutdown and President Biden’s impeachment hearings. With earnings season just around the corner, traders will be eyeing opportunities in the stock market ahead of the month- and quarter-end. The main drivers for bond and FX markets this week will be the latest round of inflation data from the Eurozone and the US. And with oil prices touching fresh 10-month highs last week there will be an unusual focus on the weekly inventory data.

Here are the week’s key events:

Monday

German import prices are due from today, whilst the market will look to see if there is any improvement in the business climate in Europe’s biggest economy. The last ifo survey was not encouraging with sentiment among German managers darkening further. The Business Climate Index slipped to 85.7 points in August, down from 87.4 points in July, its fourth consecutive fall. Assessments of the current situation fell to their lowest level since August 2020, whilst companies were increasingly pessimistic about the months ahead.

Tuesday

Following the Federal Reserve’s decision last week, we get the latest snapshot from the US housing market to see what impact rate hikes are having. The S&P Case-Shiller house prices index and new home sales are due up. Meanwhile we check in on the state of the consumer with the latest CB Consumer Confidence report, whilst the Richmond Fed manufacturing index is another to watch.

Wednesday

Australian inflation data is due up having eased back to 4.9% last month. Durable goods orders will be closely watched in the US. Meanwhile there will be plenty of attention on the weekly US crude oil inventories after prices surged last week. After four straight weeks of draws, last week saw a rise in inventories that may have hinted at cooling demand as gasoline prices rise.

Thursday

The US House Oversight Commitee plans to hold an impeachment hearing against Joe Biden. Whilst this may not have a direct impact on markets, it will be closely watched amid all the political machinations in Washington this week. Ahead of this the main data release sees the latest round of flash German and Spanish CPI inflation, US weekly unemployment claims and the final US Q2 GDP read.

Friday

If Republicans have not agreed a short-term funding deal to keep the US government from shutting down on September 30th, we could be in for a traumatic end of the month/quarter. A full, lengthy shutdown of the US government is "likely" at the end of the month, PIMCO said last week. Also look for China’s manufacturing and services PMIs, Japan’s Tokyo core inflation and the all-important US core PCE index – the Fed’s preferred gauge of inflation – for clues about what the FOMC chooses to do next.