This article first appeared in The Edge Malaysia Weekly on September 16, 2019 - September 22, 2019

The continuing uncertainty over Brexit in the UK and monetary policy meetings in the world’s largest economies, including the US, Japan and the UK, are likely to dominate market talk this week while the US-China trade war takes a breather.

It will be another four-day working week for Malaysia as the country celebrates the 56th anniversary of the founding of the federation on Monday. Unfortunately, this year’s celebrations will be held indoors as the country is shrouded by haze.

The UK is scheduled to leave the European Union (EU) on Oct 31, with or without an exit deal. Still, the European parliament could be willing to offer another extension if there is clear purpose, such as to avoid a no-deal exit.

However, certain members of the grouping, such as France, may veto any extension as French Foreign Minister Jean-Yves Le Drian has maintained that his country will not continue to do that every time the deadline approaches.

A no-deal exit will be catastrophic for the UK’s economy and social welfare as the country relies on the EU in many aspects, including the supply of food and medicine. Without a withdrawal agreement, prices of goods are likely to soar and could jeopardise the services of the National Healthcare Service.

The sluggish European economy has also prompted the EU to launch a €20 billion bond-buying programme starting Nov 1, as well as to further reduce interest rates by 10 basis points, sending the deposit rate deeper into negative territory at -0.5%.

In the US, the Federal Open Market Committee (FOMC) meeting on Wednesday will provide the biggest clues to the health of the world’s largest economy.

US President Donald Trump has been asking the Federal Reserve to pare rates further to boost growth, and it obliged at its FOMC meeting last month by slicing 25 bps off its key rate to 2.25%. The consensus is that the committee will take off another 25 bps to spur the economy.

Prior to the FOMC meeting, the US industrial production data for August will be announced on Tuesday. A day later, the US Census Bureau will release numbers for August housing starts as well as the number of permits for new construction projects.

An interest rate decision will also be made by Japan this week. On Thursday, the Bank of Japan (BoJ) will release its monetary policy statement and rate decision. It is expected to cut rates as monetary easing by other central banks has caused the yen to rally.

At a press conference after the bank’s monetary policy meeting in July, governor Haruhiko Kuroda said the BoJ was more positive about further monetary easing than before. He added that the BoJ would not hesitate to take additional easing measures if there was a greater possibility that the momentum of achieving its price stability target would be lost.

In the UK, the Bank of England is set to decide interest rates on Thursday. While the consensus is for the rate to remain at 0.75%, the bank’s monetary policy statement will be followed closely by the market.

The Office for National Statistics will be releasing retail sales data for August. Excluding fuel transactions, retail sales are expected to have fallen 0.2% month on month in August, with growth at a slower 2.3% year on year compared with July.

On Monday, China’s National Bureau of Statistics will release August retail sales numbers, which economists forecast to grow at 7.9% y-o-y, compared with 7.6% in July.

Industrial production numbers for August are also due on the same day. Economists are projecting an expansion of 5.2% y-o-y, compared with 4.8% in July.

Europe’s largest economy, Germany, where growth has turned sluggish, is expected to see a continuing drop in institutional investor sentiment in September, the ZEW survey on economic sentiment is expected to reveal on Tuesday.

At home, Datuk Seri Najib Razak’s trial on abuse of power and money laundering charges involving 1Malaysia Development Bhd funds (1MDB-Tanore trial) will resume on Tuesday, following a postponement last Wednesday because the former prime minister was down with conjunctivitis.

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