USD
The November Manufacturing PMI came in at 55.3 vs 55.4 as expected but ISM Manufacturing PMI came in at 59.3 vs 57.5 as expected for a huge beat.
Within ISM PMI employment came in at 58.4 vs 56.8 as expected, new orders came in at 62.1 vs 57.4 the previous month and new export orders came in at 52.2 as expected.
Inversion of the yield curve has occurred and traditionally it is the sign of a recession to come, however time needed for recession to hit after inversion can range between 6 months to over 2 years. The yield on 5-year bonds was below 2-year bonds for the first time in more than a decade. This is most likely due to the increase in the US government debt, which forces yields up as the supply of bonds increases, more than offsetting the decrease due to the move in safer assets.
FED’s Williams has continued in his hawkish manner and avoided cautious approach taken by his FED colleagues. He stated that US economy is strong, with a healthy labour market. He expects the US economy to continue to grow at the strong rate of 2.5% and expects price inflation to move a bit above 2%. In his statement he implied that the time to raise rates is now and that further gradual rate hikes will be appropriate. Dollar bulls loved his words.
US trade balance continues to plunge coming in at -$55.5bn vs -$55.0bn as expected. Exports fell -0.1% while imports rose 0.2%. Goods deficit came in at $78.11B and US-China October deficit came in at $43.1B vs $40.24B the prior month. Strong US dollar weigh in negatively on trade balance. Services surplus of $22.62B is the only positive in this report.
Headline NFP number came in at 155k vs 198k as expected. Unemployment and the participation rate have stayed the same as expected with former coming in at 3.7% and latter coming in at 62.9%. Average hourly earnings came in a bit softer with 0.2% m/m vs 0.3% m/m as expected and stayed the same at 3.1% y/y.
This week we will have data on inflation (CPI), consumption, business inventories and Markit PMIs. Speech of FED chair Powell will be closely monitored for additional information on monetary policy.
Important news for USD:
Tuesday:
PPI
Wednesday:
CPI
Real Earnings
Federal Budget Balance
FED Chair Powell Testifies
Thursday:
Initial Jobless Claims
Friday:
Retail Sales
Markit Manufacturing PMI
Markit Services PMI
Markit Composite PMI
Business Inventories
EUR
Italy’s Prime Minister Conte plans to negotiate with the EU on lowering Italy’s budget deficit to 1.9%. It is expected that a new revised budget proposal will be sent to the EU next Wednesday, day before the EU Leaders Summit.
The November Manufacturing PMI for the EU came in at 51.8 vs 51.5 preliminary. Germany, France and Spain data came better than expected while Italy showed contraction for the second straight month. Services PMI for the EU came in at 53.4 vs 53.1 preliminary. With prior reading being 53.7 there is a continued slide to the downside dragged by German numbers although there were positives from France, Spain and Italy.
This week ECB Monetary Policy Press Conference will be the main event as it is expected that ECB will end QE programme. Recent softer data coming from EU may change their mind so this event will be closely monitored. There are potential high market implications. The interest rate is expected to stay the same. We will have data on trade balance, industrial production and Markit PMIs.
Important news for EUR:
Monday:
Trade Balance
Exports
Imports
Tuesday:
ZEW Economic Statement Indicator (Germany)
ZEW Economic Statement Indicator
Wednesday:
Industrial Production
Thursday:
EU Leaders Summit
CPI (Germany)
ECB Interest Rate Decision
ECB Monetary Policy Press Conference
Friday:
Markit Manufacturing PMI
Markit Services PMI
Markit Composite PMI
GBP
The November Manufacturing PMI came in at 53.1 vs 51.7 as expected with the prior reading showing 51.1. This is a good recovery after the October numbers as new orders grow once again. Services PMI came in at 50.4 vs 52.5 expected with prior reading being 52.2. Big miss on the data, business expectations fell to the second-lowest reading since the financial crisis. Uncertainty around the Brexit is weighing heavily on the UK economy.
The European Court of Justice declared that the UK may revoke Article 50 of the Treaty of European Union unilaterally and possibly decide to remain in European Union if parliament fails to pass the Brexit agreement on December 11 if it so desires.
This week, the Brexit Parliament Vote will take the main stage and will be a big GBP mover. It is not expected that the current Brexit deal will pass. From an economic perspective we will get information about trade balance, industrial and manufacturing production as well as data on wages and employment.
Important news for GBP:
Monday:
Industrial Production
Manufacturing Production
Trade Balance
Tuesday:
Brexit Parliament Vote
Average Hourly Earnings
Unemployment Rate
AUD
At the G20 meeting presidents Trump and Xi agreed to place a hold on new tariffs for 90 days which raised risk appetite in the markets and propelled AUD higher against other major currencies.
RBA decided to leave cash rate at current level of 1.5% as widely expected. They reiterated that low rates are supporting the economy. They expect GDP growth to average around 3.5% for the next two years. The central scenario is for inflation to be 2.25% in the 2019 but higher in 2020 and they expect further decrease in the unemployment. Growth in household income remains low and debt levels are still high.
GDP data for Q3 came in at 0.3% q/q vs 0.6% q/q as expected and 2.8% y/y vs 3.3% y/y as expected. Huge miss on the numbers that sent AUD down. Consumption was the main drag as it fell from 0.9% q/q the previous quarter to just 0.3% q/q in Q3. Business investment was disappointing, gains in spending was created by decline in the savings for a lowest savings ratio (2.4%) since Q4 of 2007. Public demand and net exports were key growth engines. RBA’s Debelle said that they will keep a close watch on incoming data and if consumption continues to dampen in combination with rising household debt/low savings ratio they will be forced to consider cutting rates instead of hiking them as planned.
Trade balance for the month of October came in at 2.361 bn AUD vs 3 bn as expected. Miss on the estimates with exports rising 1% m/m and imports rising 3% m/m. Retail Sales rose 0.3% m/m vs 0.2% m/m as expected.
This week there will be no big data coming from Australia, but data on Chinese consumption will be monitored.
Important news for AUD:
Friday:
Retail Sales (China)
NZD
GDT auction data has come at 2.2%. This is the first positive reading after 13 consecutive auctions with falling or unchanged prices. Fonterra has cut their milk price payment forecast to NZD 6.00-6.30/kg with prior forecast being NZD 6.25-6.50/kg. Since dairy is NZ’s largest export this will have impact on trade balance and value of NZD in general. NZD has benefited greatly this week from the risk on sentiment after G20 meeting between presidents Trump and Xi so this positive data can add more fuel to the kiwi rally.
There will be a light calendar this week for NZD with data on consumption.
Important news for NZD:
Monday:
Electronic Card Retail Sales
Wednesday:
Food Price Index
CAD
Canada’s province of Alberta has decided to cut its oil production by 8.7% in order to ease the supply glut. Production will be cut on January 1st 2019 and it is expected that cuts will last until Spring of 2019, that is the estimated time needed to ship current oil storages to the market. Price of oil quickly rose which in turn gave a nice boost to CAD.
The November Manufacturing PMI came in at 54.9 vs 53.9 the prior month. New orders index rose to 53.7 vs 52.2 the prior month and employment climber to 57.1 vs 55.3 the prior month. All strong numbers blowing the wind in the sails of Canadian economy.
BOC has kept overnight rate at 1.75%. In the following statement it was said that there is more room for non-inflationary growth and the incoming data shows the slowing of economy going into Q4. There were concerns stated regarding sharply falling oil prices and falling business investment. The bright point in the statement was repeating of the fact that rates will need to rise. Governor Poloz stated in his speech that rate levels are appropriate for the “time being”. Pace of rate hikes will be data dependent and he reiterated that neutral range is “in the neighbourhood” of 2.50 – 3.50%. There was a 65% chance of a hike priced in for January however after the meeting markets see the probability of only 23%.
Canadian employment report was very strong. Employment change came in at 94.1k vs 10k as expected. Full time employment came in at 89.9k. Unemployment fell to 5.6% vs 5.8% as expected. Drop in wage growth is a bit concerning but overall this report should change BOC’s rhetoric of slowing growth.
The OPEC agreement brings 1.2mbpd of which OPEC countries will bring 800kbpd while Russia will participate with 400kbpd. Iran was exempted from the cuts. This agreement sent oil price up and in combination with strong employment report CAD finished the week stronger.
This week will be a slow one with data on housing and oil supply.
Important news for CAD:
Monday:
Building Permits
Wednesday:
EIA Crude Oil Stocks Change
JPY
Nikkei Manufacturing PMI for the month of November came in at 52.2 vs 51.8 the prior month with preliminary reading showing 52.9. As stated by Markit: New orders rose at joint-weakest rate in just over 2 years, production growth moderates and business confidence drops for sixth month. Household spending date came in at -0.3% y/y vs 1% as expected. A big miss on data that will be a drag on the inflation.
This week we will get final GDP data for Q3, data on trade and industrial production as well as number of Indexes showing the health of Japan’s economy.
Important news for JPY:
Monday:
GDP
Current Account
Goods Trade Balance
Thursday:
BoJ Corporate Goods Price Index
Friday:
BoJ Tankan Large Manufacturing Index
BoJ Tankan Large Non-Manufacturing Index
Industrial Production
CHF
The retail sales for the month of October came in at 0.8% vs -0.6% as expected with prior reading showing -2.5%. November Manufacturing PMI came in at 57.7 vs 56.4 as expected. Finally, some positive data from Swiss economy after a slew of negative data.
CPI for the month of November came in at -0.3% m/m vs -0.1 m/m as expected with core CPI coming in at 0.2% m/m vs 0.4% m/m as expected. Drop in the headline number can be attributed to falling oil prices, however drop in the core number is concerning. Perhaps SNB will be forced to intervene sooner than ECB if this downtrend persists.
This week we will have SNB interest rate decision, it is expected to stay unchanged, but the tone in the follow up monetary policy assessment might change due to change in inflationary data.
Important news for CHF:
Monday:
Unemployment rate
Thursday:
SNB Interest Rate Decision
SNB Monetary Policy Assessment
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