Forex Major Currencies Outlook (Nov 11– Nov 15)

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.

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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.}