Forex Major Currencies Outlook (Dec 2– Dec 6)

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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_{Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets.Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.}