Daily Market Outlook by Kate Curtis from Trader's Way

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katetrades

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Forex Major Currencies Outlook (Oct 21– Oct 25)

ECB interest rate decision and preliminary PMIs along with durable goods from US will be the highlights of the low volume week in terms of the economic data.

USD

Advanced retail sales in September came in at -0.3% m/m vs 0.3% m/m as expected. Previous month’s data was revised up to 0.6% m/m and it is the only bright spot in the report. Control group came in flat vs 0.3% m/m as expected. The report shows the first drop in retail sales in seven months. Since the US consumer is the main driver of the US economy this will be a blow. Projections for Q3 GDP by Atlanta Fed have been downgraded to 1.7% and it will add more pressure on the Fed to act at their October meeting. Housing starts came in at 1256k vs 1320k as expected, they are down on the month -9.4% m/m. Building permits came in at 1.387m vs 1.35m as expected, down from the previous month but better than expected.

This week we will have housing and durable goods data.

Important news for USD:

Tuesday:
  • Existing Home Sales
Thursday:
  • New Home Sales
  • Durable Goods

EUR

Industrial production in August came in at 0.4% m/m vs 0.3% m/m as expected on the back of stronger than expected reading from Germany. However, the yearly reading continued to deteriorate coming in at -2.8% y/y vs -2.5% y/y as expected and down from -2.1% y/y the previous month. German ZEW survey of current situation in October came in at -25.3 vs -23.6 as expected. The expectations component came in better than expected at -22.8 vs -26.4 although still at the lowest level since 2010. The data continue to paint a grim picture of German economy that is headed toward the recession. Final CPI for September came in at 0.8% y/y vs 0.9% y/y as preliminary reported with core CPI stayed at 1% y/y as preliminary reading showed.

This week we will have preliminary consumer confidence and PMI readings for October. We will also get the final ECB monetary policy press conference with Mario Draghi as governor. He will be succeeded in November by Christine Lagarde. No policy changes are expected.

Important news for EUR:

Wednesday:
  • Consumer Confidence Index
Thursday:
  • Markit Manufacturing PMI (EU, Germany, France)
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
  • ECB Interest Rate Decision
  • ECB Monetary Policy Press Conference
Friday:
  • Ifo Business Climate (Germany)

GBP

August employment report came on the weaker side with employment change showing a decline of 56k while the expectations were for the rise of 26k. This has nudged the unemployment rate to tick higher at 3.9% vs 3.8% previously. In addition, the average weekly earnings have dropped to 3.8% 3m/y from 4% 3m/y the previous month but they are still holding very strong. CPI for September came in at 0.1% m/m vs 0.2% m/m as expected and 1.7% y/y vs 1.8% y/y as expected. Motor fuel and second-hand car prices fell while furniture and household appliances held headline inflation number. Core CPI came in at 1.7% y/y as expected and up from 1.5% y/y the previous month, a welcoming sign. Retail sales came in flat vs -0.2% m/m as expected and 3.1% y/y vs 2.6% the previous month. A better than expected result was achieved on the back of rising sales in food stores but sales in department stores continued their decline according to ONS. It pushed retail sales in Q3 up 0.6%.

UK and EU have struck a Brexit deal. The deal avoids the border on Emerald island and puts it in the Irish sea, thus making a customs border between Northern Ireland and UK. The Parliament voted on Saturday in favour of Letwin amendment thus forcing Johnson to seek extension with EU before October 31. The letter to EU will be sent on Monday and Withdrawal Bill will be presented for voting on Tuesday.

AUD

The week of big releases from China started with September’s trade balance data which showed a rise in surplus to $36.65bn vs $34.75bn as expected. However, the reading also showed that both exports and imports fell more than expected, with the former falling -3.2% y/y vs -2.6% y/y as expected and latter falling -8.5% y/y vs -6% y/y as expected. A big drop in imports indicates slowing domestic demand which will have a devastating impact on exporting countries around the Globe while adding to the existing slowdown. Exports to US are down 10.7% y/y while imports from the US are down enormous 26.4% y/y.

Chinese CPI for September came in at 3% y/y vs 2.9% y/y as expected. This is the fastest rise in 6 years and it is led by food inflation which rose 11.2% y/y. Swine flu has cut swine population in about half thus creating record high for pork prices which rose amazing 69.3% y/y. PPI fell -1.2% m/m vs -0.8% m/m as expected for the sharpest decline in more than 3 years which will reflect badly on corporate profits.

Chinese Q3 GDP came in at 6% y/y vs 6.1% y/y as expected and down from 6.2% y/y the previous quarter. The reading shows the slowest GDP rise in almost 30 years, but taking into account the size of the economy this rate is still impressive. Industrial production in September came in at 5.8% y/y vs 4.9% y/y and such a huge beat will cover up any disappointment due to fall in GDP. Retail sales came in at 7.8% y/y as expected and up from 7.5% y/y the previous month.

RBA meeting minutes showed readiness of the board to add additional easing if needed to support growth and jobs. It is reasonable to expect prolonged periods of lower rates. There are no signs yet that household consumption is responding to rate cuts and tax rebates. Leading indicators point to slowdown in the job’s growth in the upcoming quarter. US-China trade war has been deemed as significant downside risk to the global outlook. RBA continued with its dovish stance in hopes of pushing AUD lower to help Australian economy and markets expect one more rate cut by the end of the year.

Employment report for the month of September showed a small miss in employment change 14.7k vs 15k as expected but the unemployment rate has ticked down to 5.2% from 5.3%. Participation rate also slipped to 66.1% from 66.2% which tampers with the drop in the unemployment rate. Additional bright spot in the report is rise in the full-time employment of 26.2k. RBA will be happy with this report and it will diminish the chances of a rate cut in the near future.

NZD

CPI for the Q3 came in at 0.7% q/q vs 0.6% q/q as expected and 1.5% y/y vs 1.4% y/y as expected. Better than expected reading propelled NZD higher however, CPI was 1.7% y/y the previous quarter and deputy governor Bascand pushed it lower hinting that there was a reasonable chance of another rate cut to stimulate growth and inflation. Markets are pricing a 25bp cut at the next month’s RBNZ meeting. GDT price index came in at 0.5% thus making it a third straight auction of rising prices.

This week we will have trade balance data.

Important news for NZD:

Tuesday:
  • Trade Balance
  • Exports
  • Imports

CAD

September CPI came in at 1.9% y/y same as previous month but expectations were for a rise of 2.1% y/y. The main drag on CPI were gasoline prices which fell -10.4% y/y. Median and Trim core numbers came within expectations with former at 2.2% y/y and latter at 2.1% y/y while Common CPI nudged higher to 1.9% y/y vs 1.8% y/y as expected. With no changes in core inflation and it being close to the BOC target it only lowered further already low chances of additional easing. Manufacturing sales for August came in at 0.8% m/m vs 0.7% m/m as expected and up from -1.3% m/m the previous month thanks to the rise of motor vehicle sales.

This week we will have data on consumption and wholesale with federal elections being held on Monday.

Important news for CAD:

Monday:
  • Federal Election
Tuesday:
  • Retail Sales
Wednesday:
  • Wholesale Trade

JPY

Final industrial production reading for August came in line with preliminary readings of -1.2% m/m and -4.7% y/y painting the weakness in factory activity for Q3 which will have a detrimental effect on Japanese economy. National CPI in September continued to decline coming in as expected at 0.2% y/y but down from 0.3% y/y the previous month. This is a new 30 month low. CPI excluding fresh food came in at 0.3% y/y as expected but down from 0.5% y/y the previous month. These are very troubling data, pushing inflation almost into negative territory, deflation. BOJ hints that it will act and provide more easing but they have not yet taken that step. Possibly they will provide further easing at their meeting at the end of the month.

This week we will have trade balance data with government emphasizing the fear of falling exports and preliminary October PMI figures.

Important news for JPY:

Monday:
  • Trade Balance
  • Exports
  • Imports
Thursday:
  • Markit Manufacturing PMI
  • Markit Services PMI

CHF

Trade balance in September rebounded to CHF4.02 bn vs CHF1.72 bn the previous month. Exports have risen 2.5% m/m from -3.9% m/m the previous month while the imports dropped -1.3% m/m and they were at 1% m/m the previous month.
 
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katetrades

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Forex Major Currencies Outlook (Oct 28 – Nov 1)

BOJ and BOC meetings, preliminary Q3 GDP readings from US and EU, NFP and Q3 CPI from Australia make the line-up for this jam-packed week headlined by Fed’s interest rate decision.

USD

Durable goods in September came in at -1.1% m/m vs -0.7% m/m as expected and down from 0.5% m/m the previous month. Core component came in at -0.5% m/m vs -0.1% m/m with previous month’s reading being revised down to -0.6% m/m. An additional weak report from the US manufacturing sector and US economy as a whole. Fed will be pressed even more to react at their next week’s meeting after the incoming slew of weak data. They have already increased their injections into the repo market.

This week we will have housing data, preliminary Q3 GDP data, ISM manufacturing PMI and Fed’s preferred PCE inflation data. Fed’s interest rate decision will be the highlight of the week. Opinions are still polarized but most analyst expect a rate cut, especially after weaker incoming data. In the case of a cut many analysts think that it will be the last one for the year. NFP will be an additional highlight of the week and it is expected to come out around 172k with the unemployment rate staying at 3.5% and average hourly earnings climbing to 3.4%.

Important news for USD:

Tuesday:
  • Pending Home Sales
Wednesday:
  • GDP
  • Fed Interest Rate Decision
  • FOMC Press Conference
Thursday:
  • PCE
  • Personal Spending
Friday:
  • NFP
  • Unemployment Rate
  • Average Hourly Earnings
  • ISM Manufacturing PMI

EUR

Preliminary manufacturing PMI in October came in at 45.7 same as the previous month vs 46 as expected. French PMI data were published first and EUR rallied on the back of better than expected results showing expansion (50.5 for manufacturing and 52.9 for services). Afterwards German PMI data were published and it came worse than expected (41.7 for manufacturing and 51.2 for services), showing spill overs from the recession in manufacturing sector hitting German services sector which pushed EUR back down. EU services PMI came in at 51.8 vs 51.9 as expected and it helped keep composite PMI in the expansion territory, but just barely with 50.1 pushing composite to 50.2. Start of the Q4 continues the weak path of Q3.

ECB has left the key interest rate unchanged at -0.50% as widely expected. Rates will be at present or even lower levels until inflation outlook converges to a target level of 2%. Bond purchases will start from November 1 and will continue for as long as necessary. They will be stopped shortly before raising rates. ECB Governor Draghi stated in his last press conference on this post that risks to the economic outlook remain on the downside. He added that the latest data show further weakening of the economy as well as that negative rates have positive impact on the economy. Overall the markets interpreted this as possibility of further rate cuts and pushed the EUR down. ECB results of professional forecasters show downgrades in inflation and GDP. Inflation is now seen at 1.2% in 2019 vs 1.3% previously while GDP for the same year has been downgraded to 1.1% vs 1.2% previously.

This week we will have data on business and final consumer confidence, preliminary Q3 GDP reading, inflation and employment data.

Important news for EUR:

Wednesday:
  • Economic Sentiment Index
  • Business Climate Indicator
  • Consumer Confidence Index
Thursday:
  • GDP
  • CPI
  • Unemployment Rate

GBP

Withdrawal Act Bill was passed in principle in Parliament but MPs voted down the motion that would expedite the process needed to implement the new agreement. Now the ball is in the EU’s court as extension date is expected. The most likely date mentioned is January 31, 2020 which will open up the possibility of General Election in December. However, France is taking the firm stance that the extension period should be shorter. PM Johnson is pushing for a General Election because, according to the recent polls, Tories enjoy support from 37% of voters. Probability of a no-deal Brexit is diminishing but Labour leader Corbyn insists that he will not support election until possibility of no-deal is completely removed. According to Fixed Term Parliament Act a 2/3 majority of the House of Commons is required to support an election.

This week we will have continuation of Brexit saga, we will see if the extension is granted and for how long. October 31 is the date PM Johnson stated as the day UK will leave EU with or without the deal.

AUD

In the absence of important economic news coming from Australia, AUD has had strong beginning of the week on the back of risk appetite only to fall back down at the tail end of the week with AUDUSD finishing the week where it started with a 70 pip range.

This week we will have Q3 inflation data from Australia as well as official PMIs and Caixin manufacturing PMI from China.

Important news for AUD:

Wednesday:
  • CPI
Thursday:
  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
Friday:
  • Caixin Manufacturing PMI (China)

NZD

Trade balance data in September came in at -NZD1242m vs -NZD1400m as expected. The lowering of trade deficit was achieved with higher exports which is always a good sign. Exports came in at NZD4.47 bn vs NZD4.30 bn as expected while imports came in line with NZD5.7bn.

This week we will have data on building consents and ANZ business confidence, a very important indicator. RBNZ is monitoring this indicator and until now it has been relentlessly falling. Continuation of a downtrend, in combination with other weaker incoming data, may prompt RBNZ to react and cut at their next meeting.

Important news for NZD:

Wednesday:
  • Building Consents
Thursday:
  • ANZ Business Confidence

CAD

Liberal party of PM Trudeau has won 157 seats while 170 seats is necessary for majority, therefore Trudeau will have to form a minority government. The markets were prepared for this outcome and it will not have a major impact on CAD.

Retail sales in August came in at -0.1% m/m vs 0.4% m/m as expected with prior month’s reading being revised up to 0.6% m/m. New car dealers were the best category while the biggest drag were clothing and food and beverage stores. Wholesale trade sales came in at -1.2% m/m vs 0.3% m/m as expected and down from downward revised 1.4% the previous month. Sales declined in 5 out of 7 sectors. Biggest contributors to the negative reading were declines in private and household goods as well as declines in machinery, equipment and supplies. Inventories showed the first decline in 12 months.

This week we will have monthly GDP for August and BOC interest rate decision. Although retail sales came in weaker than expected, data from Canada has been good and there will be no change in interest rate, however change in tone is possible so the monetary policy report will be closely followed.

Important news for CAD:

Wednesday:
  • BOC Interest Rate Decision
  • BOC Monetary Policy Report
  • BOC Monetary Policy Report Press Conference
Thursday:
  • GDP

JPY

Trade balance data in September came in weaker than expected at -JPY123 bn vs JPY54 bn. Exports surprised to the downside coming in at -5.2% y/y vs -3.6% y/y as expected. On the other hand, imports came in at -1.5% y/y as expected but still negative on the year. Exports in US and Asia showed the biggest drops, coming in at -7.9% and -7.8% respectively. Preliminary manufacturing PMI for the month of October came in at 48.5 vs 48.9 the previous month. Deterioration of conditions in the manufacturing sector continues with the worst reading in over 3 years. New orders and output categories continued to decline with the fastest fall in new orders since 2012. Services PMI came in above 50 at 50.3 down from 52.8 the previous month and it put the composite reading into contraction territory at 49.8. Credit rate agency Moody’s affirmed Japan’s A1 credit rate stating that stable outlook is maintained.

This week we will have inflation from the Tokyo area, consumption, employment and industrial production data. BOJ will meet this week to discuss monetary policy and produce an outlook report. A weak PMI reading may push BOJ to further ease monetary policy and revise their economic forecast down.

Important news for JPY:

Tuesday:
  • Tokyo CPI
Wednesday:
  • Retail Sales
Thursday:
  • Industrial Production
  • BOJ Interest Rate Decision
  • BOJ Monetary Policy Report
  • BOJ Outlook Report
Friday:
  • Unemployment Rate
  • Markit Manufacturing PMI

CHF

Uneventful week saw the Swissie weaken across the markets. Weaker CHF will be beneficial for Swiss economy.

This week we will have speech from Chairman Jordan, inflation and consumption data.

Important news for CHF:

Thursday:
  • SNB Chairman Jordan Speech
Friday:
  • CPI
  • Retail Sales
 

katetrades

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Forex Major Currencies Outlook (Nov 4 – Nov 8)

RBA meeting, BOE meeting, trade data and final October PMI numbers will be on the docket this week.

USD

First reading of Q3 GDP surprised to the upside coming in at 1.9% q/q vs 1.6% q/q as expected. Personal consumption was the main contributor coming in at 2.9% vs 2.6% as expected contributing 1.93pp (percentage point) to the GDP, although down from 4.6% in Q2. Government spending added 0.35pp to the reading while gross private investment fell 3%, the most in four years, and dragged GDP down -0.27pp. Core PCE was 2.2% q/q but GDP price index and GDP deflator all came weaker than expected at 1.7% and 1.6% respectively. This drop in inflation data is a worrying sign and it is preventing bigger USD strength on the headline reading. Personal spending came in ay 0.2% m/m vs 0.3% m/m as expected while personal income came in at 0.3% m/m as expected. PCE core deflator came in at 1.7% y/y as expected down from 1.8% y/y the previous month indicating slowing price pressures.

Fed has decided to cut interest rate down to 1.75%. The statement was hawkish and chairman Powell reiterated hawkish stance in his press conference stating that monetary policy is in a good place and abstained from adding any need for further accommodative action which indicated that this rate cut is the last in the cut cycle and USD rallied. He stated that only a broad “material reassessment” of outlook would prompt Fed to change its policy. Powell also added that consumer-facing companies are reporting good that consumers are doing well and that uncertainties in the global economy are now lowered with phase one of US-China deal and no-deal Brexit off the table. However, one sentence that spooked the markets and turned the USD down was that “significant move up in inflation that's persistent before we would even consider raising rates to address inflation concerns." Basically saying that although chances of rate cuts are possible due to bad news, chances of rate hikes are very slim.

NFP number came in at 128k vs 85k as expected with prior reading being revised up. The unemployment rate ticked up to 3.6% as expected due to rise in participation rate to 63.3%. Average hourly earnings came in came in line with expectations at 0.2% m/m and 3% y/y. The employment numbers show a healthy improvement indicating labour market still going strong while earnings are still struggling to keep up.

This week we will gate trade balance data and ISM’s non-manufacturing PMI.

Important news for USD:

Tuesday:
  • Trade Balance
  • Exports
  • Imports
  • ISM Non-Manufacturing PMI


EUR

Final consumer confidence for October came in at -7.6 as the preliminary reading showed. Economic confidence and industrial confidence both continued their decline and came in weaker than expected. It is worrisome that server confidence came weaker than expected indicating that weakness from industrial sector is spreading into services. The readings also indicates a weak start of Q4 for EU area.

Preliminary October CPI came in at 0.7% y/y as expected while core CPI came in at 1.1% y/y vs 1% y/y as expected. The headline did fall to the lowest level in almost 3 years, but the small rise in core number will be very welcoming, indicating that there still are some inflation pressures. Preliminary Q3 GDP reading came in at 0.2% q/q vs 0.1% q/q as expected for a small beat. The unemployment rate came in at 7.5%. Previous reading was revised up to 7.5% so that rate stayed unchanged, however the labour market seems to be plateauing and with the weak situation in the economy on the whole it may lead to increases to the unemployment rate in the future.

This week we will have final PMI readings and consumption data.

Important news for EUR:

Monday:
  • Markit Manufacturing PMI (EU, Germany, France)
Wednesday:
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
  • Retail Sales


GBP

The EU27 have agreed to grant extension to UK until 31 January 2020. Boris Johnson will now take the chance and push for the election to strengthen his position in the Parliament. He will still need 2/3 majority in the Parliament. The third move by PM to ensure elections failed to secure 2/3 majority so he presented a simple bill that gained a majority and elections will be held on December 12. Labour party supported elections since no-deal Brexit is currently not possible. Brits came up with funny names for the pre-Christmas elections such as "jingle polls," "Brexmas," and also "New Year's Leave."Parliament will be dissolved on November 6.

This week we will have services PMI and BOE rate decision. No change is expected in the rate, however BOE’s stance now that no-deal Brexit has been averted will be closely monitored.

Important news for GBP:

Tuesday:
  • Services PMI
Thursday:
  • BOE Interest Rate Decision
  • BOE Inflation Report
  • BOE MPC Meeting Minutes


AUD

Fitch affirmed Australia’s AAA rating with stable outlook but significantly lowered their GDP growth from 2.7% in 2018 to 1.7% in 2019. However, they expect GDP to bounce back in 2020 to 2.3%. RBA governor Lowe stated that Australia is in for a protracted period of very low interest rates and added that rate cuts have had a positive impact on the economy so far. Markets are already pricing around 94% chance that there will be no rate cuts at November’s meeting. Both core trimmed CPI and headline CPI for Q3 came in line with expectations with former coming in at 0.4% m/m and 1.6% y/y while the latter came in at 0.5% m/m and 1.7% y/y. Since RBA targets 2-3% range for inflation this is yet another quarter of undershooting inflation.

Official manufacturing PMI from China came in at 49.3 vs 49.8 as expected moving lower into the contraction territory. New orders fell into contraction while new export orders fell even deeper into the contraction. Output and employment index also fell. Non-manufacturing PMI dropped to 52.8 vs 53.6 as expected dragging down composite to 52. Caixin manufacturing PMI came in at 51.7 vs 51 as expected indicating that smaller business performed better than large ones at the start of Q4, however the divergence in readings make it difficult to gauge how economy will perform in Q4.

This week we will have consumption and trade balance data from Australia along with RBA rate decision. Markets expect RBA not to act now but December is open. Caixin services, trade balance and inflation data will be coming from China.

Important news for AUD:

Monday:
  • Retail Sales
Tuesday:
  • RBA Interest Rate Decision
  • RBA Rate Statement
  • Caixin Services PMI (China)
Thursday:
  • Trade Balance
  • Exports
  • Imports

Friday:
  • RBA Monetary Policy Statement
  • Trade Balance (China)
  • Exports (China)
  • Imports (China)

Saturday:
  • CPI (China)


NZD

ANZ Business Confidence for October came in stronger than expected at -42.4 vs -53.5 the previous month. This is a great start for conditions to improver in the economy and analyst are pushing back calls for rate cut several months into 2020.

This week we will have bi-monthly GDT price auction as well as employment data.

Important news for NZD:

Tuesday:
  • GDT Price Index
  • Employment Change
  • Unemployment Rate
  • Labour Cost Index


CAD

BOC left the rate unchanged at 1.75% as widely expected however its statement had a dovish tone stating that the resilience of Canadian economy “will be increasingly tested” as trade conflicts and uncertainty persist. Growth in H2 is expected to slow down below potential due to trade and weak energy sector. Growth for 2019 has been raised to 1.5% from 1.3% previously but growth for 2020 and 2021 have been lowered to 1.7% and 1.9% from 1.8% and 2% respectively.

GDP in August came in at 0.1% m/m vs 0.2% m/m as expected up from flat in July and 1.3% y/y as expected. Biggest contributor was manufacturing with 0.5% while construction made the biggest jump coming in at 0.3% vs -0.7% the previous month. Wholesale trade was biggest drag on GDP coming in at -1.3% vs 1.1% the previous month.

This week we will have trade balance and employment data.

Important news for CAD:

Tuesday:
  • Trade Balance
  • Exports
  • Imports
Friday:
  • Employment Change
  • Unemployment Rate


JPY

CPI for Tokyo area in October came in at 0.4% y/y vs 0.7% y/y as expected. The effect of sales tax increase did not move the inflation higher in the first month of its inception. CPI excluding fresh food came in at 0.5% y/y vs 0.7% y/y as expected while only ex energy category came in as expected at 0.7% y/y. Retail sales for September, the last month before the tax sales rise, came in at 7.1% m/m vs 3.5% m/m as expected and 9.1% y/y vs 6% y/y as expected. Consumers grabbed the chance and bought items before tax rise, so it is safe to assume that next month’s reading will not be as good. Preliminary industrial production for September came in at 1.4% m/m vs 0.4% m/m as expected and up from -1.2% m/m the previous month. Projections by Ministry show November at 0.6% m/m and December at -1.2% m/m. The unemployment rate went up to 2.4% from 2.2% as expected. Final manufacturing PMI continued decline and came in at 48.4 vs 48.5 as preliminary reading showed for a 40 month low. New orders lead the decline and signals a weak start to Q4.

BOJ left the both the rate and monetary policy unchanged. Forward guidance on interest rates has been modified in order to signal more clearly future rate cut chances. They see the economy continue to expand and stated that momentum to push inflation is lacking strength. Risks concerning economy and prices are skewed to the downside. Median core CPI projections have been lowered for this and the following years although 2% inflation is still a target. Governor Kuroda stated that according to current economic conditions BOJ will have to maintain easing policy beyond Spring of 2020.

This week we will have services PMI, spending and earnings data and minutes from latest BOJ meeting.

Important news for JPY:

Wednesday:
  • Markit Services PMI
  • BOJ Monetary Policy Meeting Minutes
Friday:
  • Household Spending
  • Labour Cash Earnings


CHF

October CPI saw inflation drop to -0.2% m/m vs -0.1% m/m previously. Core CPI also dropped coming in at 0.2% y/y vs 0.4% y/y previously. Absence of inflationary pressures should push SNB to ease further. Retail sales in September saw a rebound to 0.9% m/m vs -1.4% m/m previously.

This week we will have employment data.

Important news for CHF:

Friday:
  • Unemployment Rate
 
Last edited:

katetrades

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Forex Major Currencies Outlook (Nov 11– Nov 15)

RBNZ interest rate decision, preliminary Q3 GDP readings from UK and Japan, second Q3 GDP reading from Europe, consumption data from US and Australian employment data keep the week stacked with news events.

USD

ISM non-manufacturing index for October came in at 54.7 vs 53.5 as expected. A decent rebound in the reading from the 52.6 the previous month. New orders and employment indices showed a significant rebound and with plunging inventories brought strength to the report. Trade balance in September came in at -$52.5bn as expected, an improvement from -$55bn the previous month. Exports were down -0.9% while imports were up -1.7%. Trade deficit with China narrowed while US now has trade surplus with OPEC, thus making US less reliant on OPEC oil.

This week we will have inflation, consumption and industrial production data.

Important news for USD:

Wednesday:
  • CPI
Friday:
  • Retail Sales
  • Industrial Production

EUR


Final manufacturing PMI came in at 45.9 vs 45.7 preliminary. The small improvement was made by all major economies (Germany and France). Although every improvement is a welcoming sign it is still far away from the 50 expansion level. PMI is deep in the contraction territory, especially in Germany where it is at 42.1. Final services PMI came in at 52.2 vs 51.8 preliminary pushing the composite up to 50.6 vs 50.2 preliminary. Retail sales in October dropped to 0.1% m/m from 0.3% m/m previously but still beat the expectations of being flat pushing them to 3.1% y/y vs 2.4% y/y as expected.

This week we will have data on industrial production, second reading of Q3 GDP, final inflation data for October as well as trade balance data.

Important news for EUR:

Tuesday:
  • ZEW Economic Sentiment Situation (EU and Germany)
Wednesday:
  • Industrial Production
Thursday:
  • GDP
Friday:
  • CPI
  • Trade Balance

GBP

BOE has left the bank rate unchanged at 0.75% as widely expected but vote number showed that 2 members voted for a rate cut. Their reasoning for the rate cut proposal was that labour market conditions are turning and that global risks are prominent to the downside. Inflation expectations have been slashed to 1.51% in one year, 2.03% in two years and 2.25% in three years. Unemployment is projected to tick up to 3.8% in two years. Brexit uncertainties are weighing particularly heavily on business investment. This is the last BOE meeting headed by Carney as Governor. His replacement is still not announced. BOE is following the suit of other major central banks and takes dovish stance in the wake of ongoing global slowdown.

Election campaign is under way. Current polls show Conservatives at 36% and Labour at 25% which means that an absolute majority by PM Johnson is out of reach.

This week we will have preliminary Q3 GDP reading, employment, inflation and consumption data.

Important news for GBP:

Monday:
  • GDP
  • Trade Balance
  • Industrial Production
  • Manufacturing Production
  • Construction Output
  • Business Investment
Tuesday:
  • Employment Change
  • Unemployment Rate
  • Average Weekly Earnings
Wednesday:
  • CPI
Thursday:
  • Retail Sales

AUD


Retail sales in September came in at 0.2% vs 0.4% as expected. The food category was the biggest contributor with 0.1% while apparel and department stores were the biggest drags coming in respectively at -0.5% and -0.2%. Trade balance in September came in at AUD7180m vs AUD5050m as expected on the back of rising imports to 3% m/m from -3% the previous month. Imports also rose 3% m/m thus making the trade surplus rise with both rising imports and rising exports which is the best possible result.

RBA held the cash rate at 0.75% as widely expected. They expect underlying inflation to be close to 2% in 2020 and little above this in 2021. The central scenario is for economy to grow at 2.25% this year and then for growth to rise up to around 3% in 2021. Global risks are tilted to the downside. Unemployment is expected to drop below 5% in 2021. Statement ends with: ""The easing of monetary policy since June is supporting employment and income growth in Australia and a return of inflation to the medium-term target range"" which suggests a pause in rate cuts. RBA said that they are prepared to ease further but for now it seems that they are satisfied with the effects of rate cuts.

Chinese trade balance data in October came in at $42.81bn vs $40.1bn as expected. The growth of trade surplus was achieved by smaller than expected drop in both exports and imports coming in at -0.9% y/y and -6.4% y/y respectively. Surplus with US from the start of the year is at $247.7bn. China continues to not be as affected by trade war with US as the surplus shows, however the drop in imports is concerning for every export-oriented nation, Germany primarily.

This week we will have employment data from Australia and consumption, employment and industrial production data from China.

Important news for AUD:

Thursday:
  • Employment Change
  • Unemployment Rate
  • Retail Sales (China)
  • Industrial Production (China)
  • Unemployment Rate (China)

NZD


The unemployment rate in Q3 was higher than expected coming in at 4.2% vs 4.1% and up a lot from 3.9% in the previous quarter, although in line with Q1 numbers. Participation rate also went higher than expected to 70.4% from 70.2% in the previous quarter. Employment change came in as expected at 0.9% y/y but weaker than in the previous quarter when it was 1.4% y/y. Average hourly earnings disappointed coming in at 0.6% vs 1% as expected and 1.1% the previous quarter. The probability for a rate cut climbed to 60% after the report.

This week we will have interest rate decision by RBNZ. Although the chances of a rate cut have increased after the jobs report, the decision is still not clear cut. We expect them to keep the rates at current levels for this year and act in February of 2020 when they will have more data to work with.

Important news for NZD:

Wednesday:
  • RBNZ Interest Rate Decision
  • RBNZ Monetary Policy Statement
  • RBNZ Press Conference

CAD

Trade balance in September came in at -CAD0.98 bn vs -CAD0.65 bn as expected. August reading was revised down to -CAD1.24 bn. Exports fell -1.3% with gold, oil and Canola leading the way while imports fell -1.7%. In addition, the surplus in trade with US has narrowed while the deficit in trade with China increased. BOC has announced that they expect a decline in exports in H2.

Canadian net change in employment in October came in at -1.8k vs 15k as expected. Both the unemployment rate and the participation rate were unchanged and came in at 5.5% and 65.7% respectively. The fall in full time employment was -16.1k which makes this report on the soft side, adding some worries to BOC, however during past months Canadian job market was booming so we will see if this is a trend or one-of report.


JPY

Final services PMI for October came in at 49.7 vs 50.3 preliminary for the first drop below the 50 level in three years. This has also pushed composite reading down to 49.1 vs the 49.8 preliminary. The devastating typhoon pushed the index down, but questions arise such as whether the reading shows a spillover effect from the manufacturing sector as well as effect of October’s hike of sales tax. Labour cash earnings in September came in at 0.8% y/y vs 0.1% y/y as expected, up from -0.1% y/y the previous month which in combination with sales tax hike lead to household spending jumping to 9.5% y/y from 1% y/y the previous month.

This week we will have BOJ summary or opinions, machinery orders data, final industrial production data and preliminary Q3 GDP data. GDP is expected to slow down due to a fall in net exports, but private consumption and capital investment are expected to keep it positive.

Important news for JPY:

Monday:
  • BOJ Summary of Opinions
  • Core Machinery Orders
Thursday:
  • GDP
Friday:
  • Industrial Production

CHF

The unemployment rate in October ticked up to 2.2% from 2.1% previously. CHF has lost the ground this week due to increased in risk appetite, produced by trade optimism, which saw it weaken against all pairs.
 

katetrades

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Forex Major Currencies Outlook (Nov 18– Nov 22)

FOMC minutes, preliminary PMI data from Europe and Japan as well as Canadian inflation and consumption data will mark the weak ahead of us.

USD

CPI for the month of October came in at 1.8% y/y vs 1.7% y/y. The energy contributed for more than a half of the increase while healthcare and food also contributed. On the other hand, motor vehicle prices and apparel were the biggest drag. Core CPI came in at 2.3% y/y vs 2.4% y/y as expected. Both real average weekly and hourly earnings came weaker than previous month at 0.9% y/y and 1.2% y/y respectively.

Retail sales in October came in at 0.3% m/m vs 0.2% m/m as expected for a rebound from -0.3% m/m the previous month. Core retail sales came in as expected at 0.3% m/m. Home furnishings were the biggest drag followed by sales at food service and drinking places while online shopping and auto dealers contributed the most to the reading. US consumer starts the Q4 on an elevated note and with high consumer confidence it promises a healthy holiday shopping season (Black Friday and Christmas).

This week we will have housing data and minutes from the last FOMC meeting.

Important news for USD:

Tuesday:
  • Building Permits
  • Housing Starts
Wednesday:
  • FOMC Minutes
Thursday:
  • Existing Home Sales

EUR

ZEW survey of the current situation in German economy came a bit better than the previous month at -24.7 vs -25.3, however big improvements were made in expectations category with German expectations coming in at -2.1 vs -13 as expected and up from -22.8 the previous month. EU expectations came in at -1 vs 23.5 the previous month. Although the readings are still in the negative and significant rebound in global economy is farfetched expectations paint a picture of optimism. Industrial production for September nudged up to -1.7% y/y vs -2.3% y/y and added more optimism regarding slow recovery. Final core CPI in October came in unchanged at 1.1% y/y.

Preliminary German Q3 GDP came in at 0.1% q/q vs -0.1% q/q as expected. The surprisingly positive reading helped Germany avoid a technical recession in 2019. Second reading of EU Q3 GDP came in unchanged at 0.2% q/q but yearly figure was a bit stronger at 1.2% y/y vs 1.1% y/y preliminary.

This week we will have preliminary November readings for consumer confidence and PMIs.

Important news for EUR:

Thursday:
  • Consumer Confidence Index
Friday:
  • Markit Manufacturing PMI (EU, Germany, France)
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)

GBP

Preliminary Q3 GDP came in at 0.3% q/q vs 0.4% q/q as expected, up from -0.2% q/q in Q2. UK has managed to avoid a technical recession in 2019. Total business investment came in flat vs -0.5% q/q as expected while private consumption came in line with the expectations at 0.4% q/q. Manufacturing and industrial production came in weaker than expected with former coming in at -0.4% m/m vs -0.2% m/m and latter at -0.3% m/m vs -0.1% m/m. All of the data points to the economy that is just dragging along, still watching for clarifying signs regarding Brexit. GDP growth of 1% y/y is the lowest in almost a decade.

Employment change in September came in at -58k vs -102k as expected, better than expected but the number of employees continues to drop and it is a biggest drop in 4 years. Average weekly earnings came in at 3.6% vs 3.8% 3m/y as expected, slowing down but still staying high. The claimant count, which is the number of people claiming unemployment benefits, rose to 33k, almost doubling from the previous month and reaching the highest level in two years. CPI for October came in at 1.5% y/y vs 1.6% y/y as expected and down from 1.7% y/y the previous month which is a new three-year low. Energy prices were the main drag on the reading. Core CPI held at 1.7% as expected. Retail sales came in at -0.1% m/m vs 0.2% m/m as expected. Jobs, inflation and consumption all show increasingly bad situation in UK’s economy which could push BOE more toward rate cuts in the future.

Nigel Farage has stated in his campaign that his Brexit party will not contest the 317 seats Tory party won in 2017 and will fight Labour candidates in election. This will increase chances of Tory party to have the majority in the Parliament and GBP has risen on the comments. The Brexit party has also announced that it will step down from fighting for 43 non-Tory seats which additionally increases chances of Tory majority and GBPUSD really liked this news. Latest polls show a double-digit lead for the Tory party with some polls going even up to 14-point lead (42-28).

AUD

Chinese CPI in October came in at 3.8% y/y which is a 7-year high. The rise in food prices, mainly pork due to the swine flu epidemic, pushed inflation higher. PPI data continued their decline and came in at -1.6% y/y vs -1.2% y/y. The drop in PPI will make industrial profits suffer which in turn will have negative impact on the economy as a whole. Industrial production came in at 4.7% y/y vs 5.4% y/y as expected and 5.8% y/y the previous month. This is a substantial miss and shows the negative effects of the trade war on the external sector. Vehicles and smartphones recorded the biggest drops. Retail sales were also weaker than expected coming in at 7.2% vs 7.8%.

Australian employment change came in -19k vs 15k as expected for a huge miss. This led to the unemployment rate rising to 5.3% vs 5.2% previously. RBA wants to push the unemployment rate down to 4.5% so this reading shows that not only are they far away from the desired level, but they are moving in the opposite direction. Full time employment change saw a loss of 10.3k. Participation rate dropped to 66% from 66.1% while chances for RBA cut in December rose.

This week we will have minutes from the last RBA meeting.

Important news for AUD:

Tuesday:
  • RBA Meeting Minutes

NZD

As predicted in our last week’s article, RBNZ has left the cash rate on hold at 1%. This was seen as a surprise move by the markets, especially after inflation expectations data fell to 1.8% from 1.86% previously and NZD strengthened. RBNZ stated that they will continue monitoring economic developments and will act if required. Interest rates will remain at lower levels for a prolonged period of time and additional stimulus will be added if necessary. The weak NZD has helped offset the weaker global economic environment. Employment remains at around maximum sustainable level and inflation is within the target range, although it is below 2%. Governor Orr stated that the decision to leave the rate unchanged was unanimous and he expects thd economy to pick up the following year adding that current policy is very stimulatory.

This week we will have bi-monthly GDT auction.

Important news for NZD:

Tuesday:
  • GDT Price Index

CAD

BOC governor Poloz stated that wage inflation is above 4% in most measures, pointing out the strong wage growth. This month has been tough on CAD so far with the currency dropping against USD in almost every session. Risk off flows have been hurting CAD pushing it down, although by the end of the week it seems that USDCAD stabilised on the back of optimism surrounding the USMCA deal.

This week we will have manufacturing sales, inflation and consumption data.

Important news for CAD:

Tuesday:
  • Manufacturing Sales
Wednesday:
  • CPI
Friday:
  • Retail Sales

JPY

Core machinery orders, which are a good indicator for capex down the road (6 to 9 months), came in September at -2.9% m/m vs 0.9% m/m as expected and 5.1% y/y vs 8.1% y/y as expected. Preliminary Q3 GDP came in at 0.1% q/q vs 0.2% q/q as expected and down from 0.3% q/q the previous quarter. Private consumption came in at 0.4% q/q vs 0.6% q/q the previous quarter. Business spending came in at 0.9% q/q as expected and up from 0.2% q/q the previous quarter for a positive note in the weak reading. Net exports were a drag on the reading with 0.2pp due to exports falling 0.7% q/q. Final industrial production in September has seen improvement since preliminary readings and came in at 1.7% m/m and 1.3% y/y.

This week we will have trade balance and national inflation data as well as preliminary PMIs.

Important news for JPY:

Wednesday:
  • Trade Balance
  • Exports
  • Imports
Friday:
  • CPI
  • Markit Manufacturing PMI
  • Markit Services PMI
  • Markit Composite PMI

CHF

SNB chairman Jordan stated that CHF is highly valued and reiterated readiness to intervene in the markets if necessary. The danger of deteriorating international situation remains large. SNB Maechler added that SNB wants to limit the burden of negative rates for banks.

This week we will have trade balance data.

Important news for CHF:

Tuesday:
  • Trade Balance
  • Exports
  • Imports
 

katetrades

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Forex Major Currencies Outlook (Nov 25– Nov 29)

Please note that liquidity will be thin on Thursday and Friday due to the US Thanksgiving holiday, Q3 GDP data from US, Canada and Switzerland along with inflation data from US and EU and consumption data from New Zealand will mark this week.

USD

FOMC minutes showed that most members were satisfied with where the rates are at the moment. “A couple” said that Fed should reinforce statement with clear communication stating that another rate cut is not likely unless signs of “significant slowdown” appear. Prior rate cuts were warranted due to global weaknesses and trade uncertainty. Risks to the economic outlook still remain tilted to the downside according to members.

This week we will have housing and consumer confidence data, second reading of Q3 GDP, durable goods and Fed’s preferred PCE inflation data.

Important news for USD:

Tuesday:
  • New Home Sales
  • CB Consumer Confidence Index
Wednesday:
  • GDP
  • Durable Goods
  • PCE
  • Personal Spending
  • Pending Home Sales


EUR

Chief Economist at ECB Phillip Lane, who will play a more significant role now that Christine Laragde, non-economist, is the new ECB president, stated that a recession is not looming and he expects a recovery in the next year or two. ECB Vice President Luis de Guindos said that a recession in the Eurozone was “very improbable” and ECB officials stated that growth in the Eurozone is expected to remain subdued for a prolonged period of time. Lagarde stated that monetary policy will remain supportive of the economy and that is a key element is euro area fiscal policy. Preliminary consumer confidence in November shows -7.2 vs -7.6 the previous month. It is a slow climb up.

Preliminary PMI for Eurozone shows manufacturing at 46.6 vs 45.9 the previous month, services at 51.5 vs 52.2 the previous month and composite at 50.3 vs 50.9 the previous month. Rebounds in manufacturing PMI and drops in services PMI have been made by both Germany and France. Improvement of German manufacturing PMI possibly signals that bottom in the reading has been reached, however drop of services PMI to 38-month low is causing a concern of dropping domestic demand. Composite reading for EU still shows a sluggish growth.

This week we will have data on business climate from EU and Germany, preliminary inflation data for November as well as the unemployment rate.

Important news for EUR:

Monday:
  • Ifo Business Climate (Germany)
Thursday:
  • Business Climate Indicator
  • Consumer Confidence Index
Friday:
  • CPI
  • Unemployment Rate

GBP

The latest polls see the Conservative party at 42% while Labour is second with 31%. The televised debate between Johnson and Corbyn has been characterized as a draw with reports suggesting that Johnson fared better in the first half and Corbyn did better in the second half. Nationalisation of industries has become official party policy for the Labours which increased investors’ preference for the Tory party. Preliminary manufacturing PMI for November shows further drops in the reading coming in at 48.3 vs 49.6 the previous month. Services also plummeted below 50 coming in at 48.6 vs 50 the previous month thus pushing the composite to 48.5 vs 50 the previous month. General election is providing additional uncertainty to the existing one caused by Brexit and business output and orders are dropping significantly. This all adds calls for rate cut next year.


AUD

RBA minutes show board’s readiness to easy further if the need arises. They have recognized the negative effect that lower rates have on savers and confidence. Extended period of lower rates is needed for desired goals to be achieved. They decided to be wait and asses the effect of already delivered “substantial” stimulus. AUD is at the lower end of recent range. The minutes had an overall dovish feel especially considering that the board agreed that a “case could be made” for a rate cut in November.

This week we will have a speech by RBA governor Lowe as well as official PMI data from China.

Important news for AUD:

Tuesday:
  • RBA Governor Lowe Speech
Saturday:
  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
  • Composite PMI (China)

NZD

GDT auction showed increase in price of 1.7% thus making this the fifth consecutive auction of rising prices. NZD rose on the week against USD on the back of positive US-China trade talks, but as the week went along and the talks begin to sour due to US Senate’s Hong Kong support bill NZD started losing ground.

This week we will have consumption and trade data, speech by RBNZ governor Orr as well as ANZ business confidence which is a very closely watched metric by RBNZ.

Important news for NZD:

Monday:
  • Retail Sales
Tuesday:
  • Trade Balance
  • Exports
  • Imports
  • RBNZ Governor Orr Speech
Thursday:
  • ANZ Business Confidence


CAD

Manufacturing sales in September came in at -0.2% m/m vs -0.5% m/m as expected. A better than expected reading but a big drop from 0.8% m/m the previous month. Sales were down in almost half of sectors (10 of 21). Soft sales in the petroleum and coal product (-1.9%) and the motor vehicle parts (-4.3%) were the main drag while sales in machinery (5.5%) and motor vehicles (2.9%) contributed positively.

CPI in October came in at 1.9% y/y as expected, unchanged from previous month. Excluding gasoline, it came in at 2.3% y/y. While inflation in goods stayed the same at 0.2% m/m inflation in services improved to 0.4% m/m from -0.9% m/m the previous month. Core measures all came in line with expectations, median at 2.2%% y/y, common at 1.9% y/y and trimmed at 2.1% y/y. Readings in line with expectations pushed CAD higher putting more credibility that BOC will hold rates at their December meeting. Governor Poloz came out with less dovish comments than expected which gave CAD a boost. He stated that the economy is in a good place and that global easing is starting to provide a glimmer of response.

September retail sales came in at -0.1% m/m vs -0.3% m/m as expected. Previous month’s reading was revised to 0.1% m/m. Food and beverage stores and building materials were the main contributors while new car sales, furniture sales and gasoline station sales contributed negatively.

This week we will have wholesale trade data as well as Q3 GDP.

Important news for CAD:

Monday:
  • Wholesale Trade
Friday:
  • GDP

JPY

Trade balance data for October show surplus of JPY17.3 bn vs JPY229.3 bn as expected. Exports have fallen -9.2% y/y thus making this the biggest drop in exports in the last 3 years. Imports came in at abysmal -14.8% y/y, the biggest drop in 3 years as well. Exports to US, China and Asia are all down in double digits. The weak global demand has affected exports while sales tax hike and damage caused by typhoon have impacted imports.

Preliminary PMI data for November shows small improvements with manufacturing coming at 48.6 vs 48.4 the previous month and services coming at 50.4 vs 50.3 the previous month. Looking at the report IHS Markit stated that “there is a strong possibility of Japan's economy contracting in the fourth quarter.” National CPI in October came in at 0.2% y/y vs 0.3% y/y as expected. CPI ex food and energy came in at 0.7% y/y vs 0.6% y/y as expected. The sales hike tax did not have the desired impact on inflation in the first month of its inception.

This week we will have consumption data for October, first after the sales tax hike so the big drop from previous month is expected, Tokyo area inflation, unemployment rate and preliminary industrial production data for October.

Important news for JPY:

Thursday:
  • Retail Sales
Friday:
  • CPI
  • Unemployment Rate
  • Industrial Production


CHF

Trade balance data in October show shrinking of trade surplus to CHF3.5 bn vs CHF4.02 bn the previous month. The shrinking occurred due to both fall in exports and imports, however exports fell more significantly -1.3% m/m vs 2.7% m/m the previous month. SNB Maechler came out and stated that Swiss short-term growth outlook has worsened adding that easy monetary policy is still needed and reiterated their readiness to intervene in FOREX markets if the need arises.

This week we will have Q3 GDP data.

Important news for CHF:

Thursday:
  • GDP
 

katetrades

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Forex Major Currencies Outlook (Dec 2– Dec 6)

After Thanksgiving holiday markets are back in full swing and we will have rate decisions from RBA and BOC as well as Q3 GDP data from Australia and then on Friday NFP and Canadian employment report.

USD

Preliminary durable goods in October positively surprised and came in at 0.6% m/m vs -0.9% m/m as expected. Capital goods orders non defense ex air came in at 1.2% m/m vs -0.2% m/m as expected. On the back of strong durable goods report second reading of Q3 GDP came in at 2.1% vs 1.9% in the preliminary reading. Personal consumption added 1.97 pp vs 1.93 pp from the previous reading confirming the strong impact of US consumer on GDP. Gross private investment dragged the reading with -0.01 pp, much better than -0.27 pp in the preliminary reading. A rise in inventories contributed with 0.17 pp vs -0.05 pp in the first report. Personal spending came in at 0.3% as expected but personal income came in flat. This indicates that personal debt is increasing which will stimulate Fed to keep rates low for longer time.

After the markets closed on Wednesday president Trump signed a bill supporting Hong Kong protesters. China has warned the president that it will retaliate in the case of signing the bill. AUDJPY dropped on the news and risk off appetite is back in the markets. It is yet to be seen how this act will influence already shaky “phase one” trade deal.

This week we will have ISM PMI data, trade balance data and NFP on Friday as highlight of the week. The headline number expected is around 170k and there are expectations for a tick up in the unemployment rate due to rise in participation rate. Earnings are expected to stay the same at 0.2%.

Important news for USD:

Monday:
  • ISM Manufacturing PMI
Wednesday:
  • ISM Non-Manufacturing PMI
Thursday:
  • Trade Balance
  • Exports
  • Imports
Friday:
  • Nonfarm Payrolls
  • Unemployment Rate
  • Average Hourly Earnings

EUR

German Ifo business climate index in November ticked up to 95 vs 94.7 the previous month. Expectations index also climbed to 92.1 vs 91.6. Small improvements give credibility to German stability in Q4, but are far from serious rebound. According to Ifo German manufacturing is still stuck in recession. Strong domestic demand will produce positive GDP reading from Germany as they expect Q4 GDP to come in at 0.2% q/q.

Preliminary November CPI came in at 1% y/y vs 0.9% as expected and up from 0.7% y/y the previous month. Core CPI came in at 1.3% y/y vs 1.2% y/y as expected and up from 1.1% y/y the previous month which along with the reading from May is a 6-year high. Inflationary pressures are picking up which is a good sign for the economy as general, however consistency is still needed. Final consumer confidence in November came in at -7.2 as preliminary reading showed, up from -7.6 the previous month. Economic confidence came in at 101.3 vs 100.8 the previous month indicating the slowly improving situation in Euro area. The unemployment rate holds the ground at 7.5%. Ursula von der Leyen has been officially confirmed as the next European Council president. She received 461 votes out of 707 and will succeed Juncker from December 1.

This week we will have final November PMI data, consumption data and last reading of Q3 GDP.

Important news for EUR:

Monday:
  • Markit Manufacturing PMI (EU, Germany, France)
Wednesday:
  • Markit Services PMI (EU, Germany, France)
  • Markit Composite PMI (EU, Germany, France)
Thursday:
  • Retail Sales
  • GDP

GBP

Prime minister Johnson continued the election campaign by promising Brexit vote before Christmas if he wins the election on December 12. Tory party still enjoys a comfortable double digit lead in the polls, although during the week there were reports of Labour party tightening the gap. GBP did not take that well since investors like clear majority by business friendly Tories so GBPUSD weakened. On Wednesday the YouGov MRP model, which successfully predicted that Theresa May will not maintain majority in 2017 elections, showed that Tories will win 359 seats while Labour will held 211 seats. Since total number of seats in the Parliament is 650 this poll shows a clear majority, 68 seats, for the Tories which would be the greatest victory for the party since 1987.

This week we will have November PMI data.

Important news for GBP:

Monday:
  • Markit Manufacturing PMI
Wednesday:
  • Markit Services PMI

AUD

RBA governor Lowe stated that 0.25% is the effective lower bound for rates adding that they are long way from introducing QE. They expect employment growth to be slow but still positive and reasonable. There are a lot of positives in the economy according to them and the most important thing is to get inflation to move in the right direction. It will take more time for wages to push inflation up. Private capex for Q3 came in at -0.2% q/q vs flat as expected. It was up from -0.5% q/q the previous quarter but investment is still very weak.

Industrial profits from China in October fell -9.9% y/y from -5.3% y/y the previous month. This is the third consecutive month of falling profits and the biggest fall since 2011. Such a poor record can negatively influence the capex as firms cut back on investments. Falls in profits are attributed to the falling producer prices for manufacturing goods as well as slower production and sales growth. Sectors that are very sensitive to the trade war and US tariffs were hit the hardest and this reading may warrant further easing by PBOC as stimulatory measure.

This week we will have Q3 GDP and trade balance data from Australia with RBA rate decision as the highlight of the week. We expect RBA to stay on hold and reassess situation before choosing to act in 2020. We will have Caixin PMI and trade balance data from China.

Important news for AUD:

Monday:
  • Caixin Manufacturing PMI (China)
Tuesday:
  • RBA Interest Rate Decision
  • RBA Rate Statement
Wednesday:
  • GDP
  • Caixin Services PMI (China)
Thursday:
  • Trade Balance
  • Exports
  • Imports
Sunday:
  • Trade Balance (China)
  • Exports (China)
  • Imports (China)

NZD

Retail sales for Q3 smashed the expectations and came in at 1.6% q/q vs 0.5% q/q as expected. A huge beat indicating that consumers are fully embracing rate cuts which may explain RBNZ’s decision to hold rates at current level at their November meeting. October’s trade balance data show the lowering of trade deficit to -NZD1013m vs -NZD1242m the previous month. Both exports and imports were higher than the previous month indicating stronger external and domestic demand.

ANZ business confidence made a healthy improvement to -26.4 vs -42.5 the previous month. Activity outlook, which is used as a proxy for GDP, improved significantly to 12.9 vs -3.5 the previous month. Aggressive lowering of rates this year, 0.75%, is paying dividends for New Zealand economy which will keep RBNZ happy and on hold.

This week we will have bi-monthly GDT auction.

Important news for NZD:

Tuesday:
  • GDT Price Index

CAD

Wholesale trade in September came in at 1% m/m vs flat as expected and up from -1.2% m/m the previous month. Q3 GDP came in at 1.3% y/y as expected down from the very strong Q2 GDP which was revised down to 3.5% y/y. Residential investment rose 13.3% for the fastest rate in 7 years while business investment was up 2.6%. Household consumption rose 1.6%, a very welcoming sign considering the growing debt to income ratio. Inventories and net exports were the main drag cutting 1.62 pp and 0.49 pp from GDP respectively.

This week we will have trade balance and employment data as well as BOC rate decision. We expect BOC to stay on hold as Canadian economy has shown resilience but may continue with the dovish messages in the wake of weaker business sentiment and overall deteriorating conditions.

Important news for CAD:

Wednesday:
  • BOC Interest Rate Decision
  • BOC Rate Statement
Thursday:
  • Trade Balance
  • Exports
  • Imports
Friday:
  • Employment Change
  • Unemployment Rate

JPY

Retail sales in October fell -14.4% m/m vs -10.4% m/m as expected and -8.2% y/y vs -3.8% y/y as expected. This is the first month that sales tax hike was introduced and it caused a huge drop, much worse than expected. There is a fact that consumers did a stockpiling before the sales tax hike, hence the great September retail sales numbers, however the reading here is very weak.

CPI for Tokyo area in November came in at 0.8% y/y vs 0.4% y/y the previous month. CPI excluding fresh food came in at 0.6% y/y up from 0.5% y/y the previous month. Small improvements in the reading thanks to the sales hike tax, moves in the right direction, but there is still a ton of room to go to desired 2% and BOJ governor Kuroda confirmed that they will not lower that level. The unemployment rate in October stayed unchanged at 2.4%. Preliminary industrial production in October plunged to -4.2% m/m vs -2% as expected and -7.4% y/y vs -5.2% y/y as expected. Slower global demand as well as negative effects on domestic demand caused by sales tax hike and typhoon caused the worst reading in almost 2 years.

This week we will have final November PMI data as well as spending and wage data.

Important news for JPY:

Monday:
  • Markit Manufacturing PMI
Wednesday:
  • Markit Services PMI
  • Markit Composite PMI
Friday:
  • Household Spending
  • Labour Cash Earnings

CHF

Q3 GDP came in at 0.4% q/q vs 0.2% q/q as expected and pushed yearly figure to 1.1% y/y vs 0.8% y/y as expected. A surprising beat was helped by the rise in exports and government spending.

This week we will have consumption and inflation data.

Important news for CHF:

Monday:
  • Retail Sales
Tuesday:
  • CPI
 
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