In the last full trading week of the year we will have BOE and BOJ meetings, Fed’s preferred inflation measure PCE, employment data from UK and Australia, Q3 GDP from New Zealand as well as preliminary PMI numbers from EU.
USD
Fed left the rate unchanged in range of 1.50-1.75% as widely expected. Chairman Powell stated in his opening statement that moderate growth is expected to continue and added that wages have been rising, particularly for the low-paying jobs. Monetary policy is not on a pre-set course and it will be adjusted according to material changes in the outlook. During the uneventful press conference while pressed by reporters to say what will take for Fed to hike rates Powell reiterated his stance that a persistent rise in inflation rates is necessary for a rate hike indicating that the bar for raising rates is higher than the bar for cutting rates. Powell stated that this is his personal view but it still dropped the USD down.
November CPI came in at 2.1% y/y vs 2% y/y as expected and up from 1.8% y/y the previous month. Core CPI was unchanged at 2.3% y/y. Retail sales came in at 0.2% m/m vs 0.5% m/m as expected with core reading showing 0.1% m/m vs 0.3% m/m as expected. Online retailers and electronics were the biggest contributors while health and personal care was biggest drag on the reading. President Trump signed a deal thus the tariffs projected for December 15 will not be implemented which caused a rally in risk assets.
This week we will have housing, industrial production and inflation data as well as final reading of Q3 GDP.
Important news for USD:
Tuesday:
Building Permits
Housing Starts
Industrial Production
Thursday:
Existing Home Sales
Friday:
GDP
PCE
Personal Spending
EUR
ZEW survey of expectation or German economy rebounded to 10.7 from -2.1 previous month. German exports, private consumption and a tight labour market propelled the reading into positive matching the levels from February of 2018. Eurozone expectations also rebounded to 11.2 from -1 the previous month.
ECB left key rates unchanged as expected. Rates will remain at present or lower levels until inflation outlook converges close to but bellow 2% level. The Bond buying program will continue until shortly before rates are raised. New ECB president Lagarde stated that incoming data point to continued muted inflation pressures and that highly accommodative policy is still needed. Some initial signs of stabilisation start to appear in global growth. During the Q&A part she stated that inflation direction in 2022 is good but still not at the desired target of close to 2%. Ultimately, she added that she is neither a dove nor a hawk and that her ambition is to be an owl.
This week we will have preliminary December PMIs and consumer confidence as well as final inflation data for November.
Important news for EUR:
Monday:
Markit Manufacturing PMI (EU, Germany, France)
Markit Services PMI (EU, Germany, France)
Markit Composite PMI (EU, Germany, France)
Wednesday:
Ifo Business Climate (Germany)
CPI
Friday:
Consumer Confidence Index
GBP
GDP in October came in flat vs 0.1% m/m as expected, with 3-month rolling average also staying flat, indicating stagnation or contraction in Q4. Manufacturing and industrial production improved on monthly and yearly basis while construction output continued to deteriorate at increased pace. Trade balance deficit widened in October due to imports rising 8.3% m/m while exports improved by 1.8% m/m. Brexit stockpiling is still in play.
Election results showed a clear majority for Tory party which won 364 seats of 650 available making this the largest Conservative victory since 1987 when they were led by Margaret Thatcher. The clear victory of business friendly Tories ignited investor confidence and GBP surged across the markets more than 300 pips. PM Johnson stated that UK will leave EU on January 31. Labour party leader Corbyn announced his resignation.
This week we will have preliminary December PMIs, employment, consumption and inflation data as well as final reading of Q3 GDP. The main event will be BOE’s rate decision. No change is expected but the incoming data has been bad so we will see if more members opted for a rate cut, last time there were 2 votes. Conservative victory in election should move members to a more neutral stance, however the issue of Brexit is still weighing on the economy.
Important news for GBP:
Monday:
Markit Manufacturing PMI
Markit Services PMI
Markit Composite PMI
Tuesday:
Claimant Count Change
Average Hourly Earnings
Unemployment Rate
Wednesday:
CPI
Thursday:
Retail Sales
BOE Interest Rate Decision
BOE MPC Meeting Minutes
Friday:
GDP
Business Investment
AUD
Chinese trade balance for October came in at $38.73bn vs $42.81bn the previous month. Exports continued their decline coming in at -1.1% y/y, the fourth consecutive month of falling exports, with exports to plunging by 23%. Imports showed their first positive reading since April coming in at 0.3% y/y. The rise in imports will bring joy to all of the exporting nations around the globe and may improve global economic situation. CPI in November rose to 4.5% y/y from 4.3% y/y the previous month. Food prices were the biggest contributor with 19.1% y/y due to the devastation caused by the swine flu (pork prices rose 110% y/y!). Core CPI is holding at 1.4% y/y. PPI came in better than expected with -1.4% y/y but still in the negative territory creating concerns about industrial profits and capex.
This week we will have minutes from the latest RBA meeting as well as employment data from Australia and consumption and industrial production data from China.
Important news for AUD:
Monday:
Retail Sales (China)
Industrial Production (China)
Tuesday:
RBA Meeting Minutes
Thursday:
Employment Change
Unemployment Rate
NZD
Card spending in November came in at 2.6% m/m vs 0.5% m/m as expected and 5.1% y/y. A strong rebound in the consumption with card spending making up to 70% of core retail sales. Yet another sign of positive effect that low rates have on the economy. The New Zealand government announced that government spending will rise to NZD12bn with the majority of it on infrastructure.
This week we will have data on business confidence, bi-monthly GDT auction as well as Q3 GDP and trade balance data.
Important news for NZD:
Tuesday:
ANZ Business Confidence
GDT Price Index
Wednesday:
GDP
Trade Balance
Exports
Imports
CAD
Housing starts in November slowed down to 201.3k vs 215k as expected with previous reading showing 202k. Building permits for October also missed the expectations coming in at -1.5% m/m vs 2.8% m/m as expected. Residential permits was -3.2% and it was the lowest reading since March.
This week we will have inflation and consumption data.
Important news for CAD:
Wednesday:
CPI
Friday:
Retail Sales
JPY
Final Q3 GDP reading came in at 0.4% q/q vs 0.1% q/q preliminary. Private consumption came in at 0.5% q/q while business spending contributed with 1.8% q/q. The rise in capex, published last week, is a very encouraging sign of things to come, however the sales tax hike will undoubtedly have a negative effect on personal consumption in Q4. Core machinery orders in October fell heavily coming in at -6% m/m vs -2.9% m/m the previous month so future capex is not encouraging and it indicates the contraction in Q4 GDP which is projected between 2.7% and 3% y/y.
This week we will have preliminary December PMIs, trade balance and national inflation data as well as BOJ interest rate decision.
Important news for JPY:
Monday:
Markit Manufacturing PMI
Markit Services PMI
Markit Composite PMI
Wednesday:
Trade Balance
Exports
Imports
Thursday:
BOJ Interest Rate Decision
BOJ Monetary Policy Statement
Friday:
CPI
CHF
SNB has left the policy rate unchanged at -0.75% as widely expected. The accompanying statement showed that they consider the franc to be highly valued with fragile FX market. They reiterated their willingness to intervene in FX market if need arises and assessed that risks to the global economy are tilted to the downside. SNB chief Jordan stated that the franc would appreciate rapidly without negative rates and that inflation would turn negative if monetary policy would is tightened. Seasonally adjusted unemployment rate in November stayed at the same level of 2.3%.
This week we will have trade balance data.
Important news for CHF:
Thursday:
Trade Balance
Exports
Imports
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