Forex Major Currencies Outlook (Nov 12 – Nov 16)

A divided Congress will present a hindrance for president Trump and his legislative actions. There may be strong opposition from Democrats in the House regarding further fiscal stimulus and tax reforms.

FED has kept interest rate at 2 – 2.25% as expected. The FOMC statement had a hawkish tone. Strength of labour market was emphasized as well as the strongest wage growth in the past decade. Based on their tone, the market is expecting a rate hike at December’s meeting of 25bp with about 80% being priced in. The only change in the FOMC statement is that Business Investment is now described as moderate, which as a downgrade from the stable as was stated in September’s meeting.

This week we will get data regarding inflation (CPI) and real earnings m/m, on Thursday we will have data regarding consumption in USA (Retail Sales), data from Philadelphia Fed regarding Manufacturing and Employment and data on Business Inventories, while on Friday we will have data regarding Industrial production.

Important events for USD:

Tuesday:

• Federal Budget Balance

Wednesday:

• CPI m/m
• CPI y/y
• Core CPI m/m
• Core CPI y/y
• Real Earnings m/m

Thursday:

• Retail Sales m/m
• Core Retail Sales m/m
• Retail Control m/m
• Philadelphia Fed Manufacturing Index
• Philadelphia Fed Employment
• Business Inventories m/m

Friday:

• Fed Industrial Production m/m

EUR

Italy will have to send a new budget draft by November 13th. EU’s Moscovici stated that he expects a strong, precise answer from Italy on budget by November 13th. He stated that further steps will depend on Italy’s response and reiterated that EU’s fiscal rules must be respected. He also added that sanctions can be applied if there is no compromise. Italy insists that maximum deficit will be 2.4% while EU sees it at 2.9%.

Final services PMI for the month of October came in at 53.7 vs 53.3 preliminarily and Composite PMI came in at 53.1 vs 52.7 preliminarily. Spain led the way and was followed by Germany. Data from France was a bit weaker and Italy’s PMI came below 50, indicating contraction. This is a mildly bullish data that can signal ECB that they are on the right track with their policies.

This week we will have information about the economic sentiment in the EU, GDP flash release for Q3, data on Industrial Production and Trade balance and finally on Friday inflation data will be out.

Important events for EUR:

Tuesday:

• ZEW Economic Sentiment Indicator

Wednesday:

• Industrial Production m/m
• Industrial Production y/y
• GDP q/q
• GDP y/y

Thursday:

• Trade Balance

Friday:

• CPI m/m
• CPI y/y
• Core CPI m/m
• Core CPI y/y

GBP

The Brexit saga continues to dominate news coming from the UK. After Cabinet’s meeting on Tuesday PM May’s spokesman expressed his confidence that the deal will be reached and that Britain will aim to reach a deal as soon as possible but not at any cost. BBC has obtained a document in which it states that on November 19 the withdrawal agreement and future framework will be put to parliament by way of a statement from Raab.

Preliminary GDP data for Q3 came in at 0.6% q/q as expected compared to 0.4% q/q for the Q2, 1.5% y/y as expected and 0.0% m/m vs 0.6% m/m as expected. Total business investment came in at -1.9% y/y vs -0.1% y/y as expected. Private investment continues to be a drag on the UK economy. Private consumption came in at 0.5% as expected while Government consumption rose to 0.6% q/q. Exports have missed expectations but imports also fell so the overall effect of trade on GDP is positive.

This week there is a lot on calendar from GBP. Aside from the Brexit news which should be closely followed we will have data on employment and wages, PPI, inflation and consumption in the UK.

Important events for GBP:

Tuesday:

• Average Weekly Earnings, Regular Pay y/y
• Average Weekly Earnings, Total Pay y/y
• Unemployment Rate
• Claimant Count Change

Wednesday:

• PPI Input m/m
• PPI Input y/y
• PPI Output m/m
• PPI Output y/y
• CPI m/m
• CPI y/y
• Core CPI y/y
• RPI m/m
• RPI y/y
• HPI y/y

Thursday:

• Retail Sales m/m
• Retail Sales y/y
• Core Retail Sales m/m
• Core Retail Sales y/y

AUD

Services PMI for China came in at 50.8 vs 53.1 prior. Composite PMI for China came in at 50.5 vs 52.1 prior. These numbers still show expansion in the Chinese economy (value over 50 represents expansion) however Services PMI hits its lowest level since September 2017 while Composite PMI fell to lowest level since June of 2016. This can have negative impact on the AUD and Australian economy in general.

RBA has kept the interest rate at 1.5% as expected. In the statement following the interest decision - low rates support the economy. Further progress on unemployment and inflation will be gradual. It is expected that unemployment will fall to 4.75% in 2020 and central scenario for inflation is 2.25 percent in 2019, bit higher in 2020. GDP will average 3.5% in 2018 and 2019 before slowing down in 2020. The outlook for the labour market remains positive and wage growth will pick up over time. Board members of RBA stated in the Statement on Monetary Policy that they do not see a strong case for a near-term change in the cash rate. They forecast inflation at 1.75% in December of 2018, at 2% in June 2019 and at 2.25% from December 2019 to December 2020.

This week we will get data regarding wages and employment from Australia. Since employment and inflation represent the core of RBA mandate these data will be closely monitored.

Important events for AUD:

Wednesday:

• Wage Price Index q/q
• Wage Price Index y/y

Thursday:

• Employment Change
• Participation Rate
• Unemployment Rate
• RBA Deputy Governor Debelle Speech

NZD

Export commodity index prices published by ANZ showed a drop of 2.4% m/m and 5.6% y/y. This is the 5th month in a row of falling export prices. The latest New Zealand dairy auction showed prices down -2.0% with an average selling price of $2851 per tonne. This marks the 11th month in a row of falling or flat dairy prices.

The employment report for Q3 has smashed all expectations. The unemployment rate came in at 3.9% vs 4.4% as expected. Employment change came in at 1.1% q/q vs 0.5% q/q as expected and 2.8% y/y vs 2.0% y/y as expected. Participation rate rose to 71.1% vs 70.9% as expected. Average hourly earnings came in at 1.4% vs 0.8% as expected. A very strong report overall with all major categories beating expectations.

RBNZ decided to leave the OCR at 1.75% as expected. They now see the rate hike in Q2 of 2020 vs Q3 2020 as before. They see average OCR in Q2 of 2020 at 1.8% and up to 2.41% in December 2021. Employment is around maximum sustainable level. CPI inflation remains below targeted level of 2% so further supportive monetary policy is needed. GDP is expected to rise in 2019 and Governor Orr said that he would consider a rate cut in the event GDP falls below expectations. Emphasis is now switched over to GDP data.

This week we will have light economic calendar for NZD. Food Price Index will be only notable event.

Important events for NZD:

Monday:

• Food Price Index m/m

CAD

Governor Poloz stated that BOC has a positive outlook and believes that they are normalising at the right pace. He voiced his concerns regarding trade risks which he considers significant.

Ivey PMI data for the month of October came in at 61.8 vs 50.4 the previous month. Ivey PMI captures business conditions in Canada and after the drop in the previous month this is a quite nice comeback. Employment moved up to 54.3 from 51.6 last month, Inventories climbed to 60.9 from 51.8 last month and Prices rose to 72.6 vs 68.8 last month.

Keystone XL pipeline (Canada to Texas oil pipeline) has been blocked by Federal Court. This pipeline is crucial for Canadian Oil exports. In addition to that oil prices are falling and are closing on the year’s lows devaluing CAD further. Considering the light economic calendar for the next week from Canada this can weigh down heavily on the CAD.

This week we will have information from OPEC regarding oil as well as manufacturing sales from Canada.

Important events for CAD:

Tuesday:

• OPEC Monthly Market Oil Report

Friday:

• Manufacturing Sales m/m

JPY

In his speech on Monday BOJ Governor Kuroda stated that the easing program will continue until a targeted inflation of 2% is reached. He added that BOJ is aware that continued easing policy affects the financial system stability and financial intermediation.

Overall household spending came in at -1.6% y/y vs +1.5% as expected. This is a big miss especially considering that the prior reading was +2.8%. A drop in household spending will have negative impact on inflation in Japan making it harder to reach the target of 2%. The time horizon needed for reaching inflationary goal is widening.

This week we will have data for Q3 Preliminary GDP as well as data for industrial production.

Important events for JPY:

Wednesday:

• GDP q/q
• GDP y/y
• GDP Price Index y/y
• Industrial Production m/m
• Industrial Production y/y

CHF

SNB Governor Jordan reiterated his stance that FX market is still fragile and that they are prepared to intervene if the need arises. SNB looks like it is happy with current CHF valuation and will look toward normalising their monetary policy after the ECB does. SNB’s Maechler stated that it is too early for tightening. He also evaluated economic developments as favourable but inflation pressures remain low.

This week we will have data regarding producer price index.

Important events for CHF

Tuesday:

• PPI m/m
• PPI y/y

_{You can follow all economic events on the Economic Calendar page on our Website. MT4 server time is set to GMT + 2 and if you need assistance converting MT4 server time to your local time you can use some of the online time converters such as WorldTimeBuddy.}

_{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.
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