USD
December non-manufacturing PMI came in at 57.6 vs 59.0 as expected with prior reading being 60.7. Reading is a five-month low and the only bright point is that new orders ticked up higher.
FED members Bostic and Evans (Evans is a voting member in 2019) have been bit more dovish than expected. Evans stated that “FED has the capacity to wait and take stock of incoming data” and added that H1 of 2019 would be the key for deciding on future rake hikes. Dollar bulls didn’t like the sound of that and dollar was trading lower across the markets. FOMC minutes showed that officials felt that timing and extent of rate hikes is less clear. FED should assess the impact of risks that have become more pronounced in recent months. Chairman Powell said that there is no specified amount of rate hikes. Vice Chair Clarida stated that the economy can tolerate inflation above 2%, effectively saying that there is no need to rush with rate hikes.
Trade balance data from US have been delayed due to the government shutdown. In 2013 when the government shutdown lasted 16 days GDP was slashed 0.6%. We are currently at the day 20. CPI for the month of December came in at 1.9% y/y as expected with core CPI at 2.2% y/y as expected and 0.2% m/m. Average weekly earnings came in at 1.2% y/y as expected. All numbers came in line with expectations.
This week we will have data on consumption, housing and industrial production as well as FED Beige Book. Please note that the US government is still partially closed so in the case that it opens fully during this week we will have plethora of data that were delayed, for example trade balance data, durable goods orders, new home sales, etc.
Important news for USD:
Wednesday:
Retail Sales
FED Beige Book
Thursday:
Building Permits
Housing Starts
Friday:
FED Industrial Production
EUR
Eurozone Retail Sales for the month of November came in at 0.6% m/m vs 0.2% m/m as expected and same as the previous month. This puts yearly figure at 1.1% y/y vs 0.4% y/y as expected. This is one positive reading coming from Eurozone showing that spending and consumption can remain elevated in Q4.
The unemployment rate in the Eurozone dropped to 7.9% from 8.1%. This is a 10-year low for unemployment showing that the labour market continues to tighten. Now, if these numbers can translate to wage growth, inflation picture for Eurozone will be much brighter.
This week we will have data on trade balance and current account, industrial production as well as inflation from both Germany and Eurozone. Full year GDP data for 2018 for Germany will be published on Tuesday.
Important news for EUR:
Monday:
Industrial Production
Tuesday:
Trade Balance
GDP (Germany)
Wednesday:
CPI (Germany)
Thursday
CPI
Friday:
Current Account
GBP
Vote on the Brexit deal in Parliament is set for Tuesday January 15. Prime Minister May has indicated yesterday that if Parliament rejects the deal, she is prepared to lead the UK out of the EU on March 29 in any event. MPs voted in favour of demanding that the government comes up with an alternative plan to Brexit within three working days if it loses the meaningful vote next week.
November GDP came in at 0.2% m/m vs 0.1% m/m as expected. Index of services came in at 0.3% m/m vs 0.1% m/m as expected and that pushed the GDP figure higher since factory data was disappointing with industrial production coming in at -1.5% y/y vs -0.7% y/y as expected and manufacturing production coming in at -1.1%. y/y vs -0.7% y/y as expected. Goods trade balance came in at -£12.0bn vs -£11.4 as expected with the prior reading showing -£11.9bn while the total trade balance deficit declined to -£2.904bn. Total exports rose by 0.4% while the imports increased by 0.1%.
This week the Brexit Parliament Vote will take the centre stage. Pound will be heavily influenced by the outcome. It is expected that the deal will not pass so the government will have to provide plan B within three working days which puts the deadline at January 21. We will have data on consumption and inflation later in the week.
Important news for GBP:
Tuesday:
Brexit Parliament Vote
Wednesday:
CPI
Friday:
Retail Sales
AUD
Manufacturing PMI for the month of December fell to 49.5 vs 51.3 the previous month. This is the first time in 26 months that the reading shows contraction. October’s PMI was above 58, thus this reading shows sharp decline and generally weaker conditions in the Australian economy. Six out of seven activity indexes fell, most notably production, employment and exports. New orders index rose but it is still in contraction territory, below 50.
The November Trade Balance number came in at 1.925bn AUD vs 2.175bn AUD as expected. Slightly weaker than expected reading but encouraging fact is that exports rose 1% m/m. Building permits dropped 9.1% in November for the largest monthly decline since 1980 thus enhancing Australia’s housing problem. Retail Sales came in at 0.4% m/m vs 0.3% m/m as expected.
This week we will have Chinese trade balance data.
Important news for AUD:
Monday:
Trade Balance (China)
NZD
Building permits for the month of November came in at -2% m/m vs 1.5% m/m the previous month. Overall trend is still to the upside. NZD has been very strong this week profiting from the rise in risk appetite and USD weakness.
Important news for NZD:
Monday:
Food Price Index
Tuesday:
GDT Price Index
Electronic Card Retail Sales
Thursday:
Business NZ Manufacturing Index
CAD
Canadian Ivey PMI data for the month of December came in at 59.7 vs 57.2 the previous month and 58.1 as expected. Although the overall number is higher, the employment index decreased for the second consecutive month.
Trade balance data for the month of November came in at -2.06bn CAD vs -2.15bn CAD as expected with the prior reading showing -1.17bn CAD. Better than expected numbers but the deficit widens. Exports have fallen more than expected at -1.8% while imports fell only -0.3%. This is the fourth consecutive month of falling exports with 8 of 11 sectors reporting decline. The energy sector led the way with decrease of 9.2%, mostly due to the lower prices.
BOC has left the overnight rate unchanged at 1.75% as widely expected. They stated that pace of rate hikes will depend on oil and housing and added that housing activity and consumption are weaker than expected. They acknowledged slowdown in global economic growth and see the signs that US – China trade war is weighing in on global demand and commodity prices. The drop in global oil prices has a material impact on the Canadian outlook, resulting in lower terms of trade and national income. Forecast for 2018 GDP has been lowered to 2% vs 2.1% prior and it is expected that inflation will be below for the most of 2019 due to lower gas prices. The inflation will return to 2% by late 2019 as transitory effects unwind. As stated in statement “there is no pre-set course” for future rate decisions and “it’s all about the data”.
This week we will get inflation data from Canada and OPEC report on oil.
Important news for CAD:
Wednesday:
EIA Cushing Crude Oil Stocks Change
Thursday:
OPEC Monthly Oil Market Report
Friday:
CPI
JPY
Labour cash earnings came in at 2% y/y vs 1.2% y/y as expected with real cash earnings coming in at 1.1% y/y vs 0.4% y/y as expected. Nice beat on the data and perhaps higher wages will feed into inflation to bring it back closer to the BOJ target of 2%.
BOJ governor Kuroda stated in his speech that Japan’s economy is expanding moderately and that overseas risks are heightening. He assessed Japan’s financial system as stable and added that BOJ will maintain QQE with yield curve control for as long as needed to achieve targeted 2% inflation in stable manner.
Household spending for the month of November came in at -0.6% y/y vs -0.1% y/y as expected. This number is down for the third consecutive month while wages are rising and consumer confidence is positive. Trade balance data came in at 1348.7bn JPY vs – 612.6bn JPY as expected.
This week we will have national inflation data and data on industrial production.
Important news for JPY:
Friday:
CPI
Industrial Production
CHF
November retail sales data came in at -0.5% y/y vs -0.6% y/y as expected and the unemployment rate came in at 2.4% as expected. CPI data came in at -0.3% m/m vs -0.2% m/m as expected and 0.7% y/y vs 0.8% y/y as expected. Core CPI came in at 0.3% y/y vs 0.2% y/y as expected. Although the core inflation measure ticked higher, it is still too close to 0% level. If headline inflation continues its downtrend, things can get messy for the economy.
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