Forex Major Currencies Outlook (Nov 26 – Nov 30)

December’s hike is not affected by their statements but odds for three rate hikes in 2019 are now lower. Atlanta FED lowered its forecast for Q4 GDP to 2.5% from 2.8% citing falling inventory investment and real residential investment. The report issued stated that FED has hinted that they could pause the rate hike cycle in the Spring of 2019.

US Durable Goods Orders came in at -4.4% vs -2.6% as expected. That is the largest drop in 15 months. Durable Goods ex Transportation came in at 0.1% vs 0.4% as expected and Capital goods orders non-defense ex-air came in at 0.0% vs 0.2% as expected. Every category came in lower than expected for a poor reading which will certainly catch FED’s attention.

This week we will have housing data, second reading of the Q3 GDP, inflation (PCE, FED’s preferred), FOMC minutes and G20 Summit on November 30 – December 1.

Important events for USD:

Tuesday:

• HPI m/m
• HPI y/y
• Consumer Confidence Index

Wednesday:

• GDP q/q
• Goods Trade Balance
• New Home Sales
• New Home Sales m/m
• FED Chair Powell Speech

Thursday:

• Core PCE Price Index m/m
• Core PCE Price Index y/y
• PCE Price Index m/m
• PCE Price Index y/y
• Personal Spending m/m
• Personal Income m/m
• Initial Jobless Claims
• Pending Home Sales m/m
• Pending Home Sales y/y
• FOMC Minutes

EUR

The EU commission has rejected Italian budget as was expected. The EU sees Italy's budget as a serious non-compliance risk. EDP (Excessive Deficit Procedure) against Italy is warranted. Policymakers acknowledged that data was weaker than expected but data remains in line with expansion and gradually rising inflationary pressures. A remark was made that the number of arguments pointed towards risks to growth tilting to the downside. ECB still views the rate hike as “through the summer of 2019” but markets have slowly priced it out from the Q4 next year. Preliminary Manufacturing PMI on Friday came in at 51.5 vs 52.0 signalling additional slowdown in the EU zone. This is a 32-month low and these PMI readings account to GDP growth of 0.3% in Q4 according to Chris Williamson, the IHS/Markit chief business economist.

This week we will have data on business conditions, inflation and unemployment in EU and Germany, as well as data regarding consumption in Germany.

Important events for EUR:

Monday:

• IFO Business Climate (Germany)

Thursday:

• Unemployment Rate (Germany)
• CPI m/m (Germany)
• CPI y/y (Germany)
• Services Sentiment Indicator
• Economic Sentiment Indicator
• Consumer Confidence Index

Friday:

• Retail Sales m/m (Germany)
• Retail Sales y/y (Germany)
• Unemployment Rate
• CPI y/y
• Core CPI y/y

GBP

The Brexit saga continues and PM May will not get a chance to renegotiate the terms of the deal with EU over the coming weekend. She will meet with Juncker only after the EU meeting. The focus has now moved to Gibraltar, the lonely outpost of Britain on the Iberian Peninsula. On Thursday, Bloomberg obtained a document showing that further Brexit agreements have been made. The EU has admitted the UK’s independent trade policy and both sides are committed to getting rid of backstop on the Irish border. This news sent GBPUSD about 150 pips up and over 1.29. Move up was pushed also by the thin liquidity in the markets due to the Thanksgiving holiday. Issues of fisheries, environmental standards and Gibraltar are still to be resolved before the Summit on Sunday. Spain threatened to place a veto on the Brexit agreement if the two sides cannot reach an agreement. They have asked the UK to provide a solution for the large number of Spanish workers who cross the border daily.

BOE's Saunders stated that Q4 economic growth will likely slow after a strong Q3 gain. There is a chance that Q1 2019 growth will also slow. Brexit is having a great impact on business considering that business investments are not picking up in the UK due to the uncertainties surrounding the British economy.

This week there is a light economic calendar for the GBP, however all eyes are set on EU Leaders Summit that will be held on Sunday 25th. The main topic will be Brexit deal and outcome of the Summit will have large impact on future GBP movements.

Important events for GBP:

Wednesday:

• BOE Financial Stability Report
• BOE Governor Carney Speech

AUD

The RBA November Meeting Minutes revealed that the next move in the interest rates will be more likely up but that there is no strong case for a near term move. Employment figures are stronger than expected and they expect that unemployment will fall to 4.75% during mid-2020. Lower AUD has helped domestic economic growth. Further growth will be supported by accommodative monetary policy. It was assessed that trade protectionism represents a significant risk for the global economy.

This week we will have data regarding business confidence, credit in private sector as well as in housing and manufacturing and non-manufactoring PMIs from China.

Important events for AUD:

Thursday:

• ANZ Business Confidence

Friday:

• RBA Housing Credit m/m
• RBA Private Sector Credit m/m
• Manufacturing PMI (China)
• Non-Manufacturing PMI (China)

NZD 

The New Zealand GDT Price Index came in at -3.5%. Dairy prices, the main export of New Zealand, have fallen for the 13th consecutive auctions. They are now down 25.8% since May. NZD has been cruising up lately on the risk on sentiment and strong employment and CPI data, however data like this can severely undermine Kiwi.

This week we will have data regarding trade balance and housing as well as financial stability report.

Important events for NZD:

Monday:

• Trade Balance
• Exports
• Imports

Tuesday:

• RBNZ Financial Stability Report

Thursday:

• Building Consents m/m

CAD

The Canadian dollar has been battered following the decline in oil prices. Talks about OPEC cutting production has not brought results and underpinned CAD. US president Trump is all for lower oil prices and in his recent tweets he thanked Saudi Arabia and called for even lower oil prices. He sees the drop in oil prices as a big tax cut for US and the rest of the World. Saudi energy minister Khalid Al-Falih says there is no slowdown in production and that they're pumping more in November than October. Oil is continuing to drop, this is a seventh week in a row of falling oil prices and now we are heading toward the $50 level.

CPI came in at 0.3 m/m vs 0.1 m/m as expected and 2.4% y/y vs 2.2% y/y as expected. All three Core CPIs, BOC pays close attention to them, came in as expected, Core common at 1.9%, Core median at 2.0% and Core trim at 2.1%. September Retail Sales came in at 0.2% m/m vs 0% m/m as expected. Retail Sales ex-Autos came in at 0.1% vs 0.3% as exp. Better headline numbers and stable core inflation numbers will signal BOC that is on the good path but due to the not so strong retail sales ex autos and falling oil prices, they will be in no hurry to raise interest rates.

This week we will have data regarding Current Account as well as monthly and quarterly GDP, Raw Material and Industrial Product price indexes.

Important events for CAD:

Thursday:

• Current Account

Friday:

• GDP m/m
• GDP q/q
• IPPI m/m
• IPPI y/y
• RMPI m/m
• RMPI y/y

JPY

Trade balance for JPY came in at -Y449.3bn vs -Y70bn as expected. Exports came in at 8.2% vs 8.9% as expected and imports came in at 19.9% vs 14.1% as expected. Huge miss on trade balance, exports rose slower than expected and imports rose more than expected. Dangers of an escalating trade war do not help to paint a bright picture for Japanese trade balance in the future.

BOJ Kuroda stated that they are determined to keep the current easing policy. Easing policy has, according to him, helped Japan’s economy to recover and will eventually bring inflation to the goal. According to him there is no need to ease the policy even further but current stimulus programme must be patiently maintained.

National CPI for the month of October came in at 1.4% y/y as expected vs 1.2% the prior month. CPI excluding fresh food and energy, this is the reading that BOJ watches and wants to push toward 2% target, came in at 0.4% y/y as expected. Although the headline number showed the improvement compared to the previous month the main BOJ inflation measure is far away from the 2% mark and it will take a long time for it to get up there.

This week we will have data on consumption, inflation in Tokyo area, employment and industrial production.

Important events for JPY:

Thursday:

• Retail Sales m/m
• Retail Sales y/y

Friday:

• Tokyo CPI y/y
• Tokyo CPI excl. Food and Energy y/y
• Tokyo Core CPI y/y
• Unemployment Rate
• Jobs to Applicants Ratio
• Industrial Production m/m
• Industrial Production y/y

CHF

SNB Maechler came out over the weekend with comments on Switzerland’s economic situation. According to him negative interest rates are indispensable for Swiss economy in the current context as they reduce CHF attractiveness.

Trade balance data came in at CHF 6.57b vs CHF 2.43b the prior month. Exports rose sharply 6.3 m/m vs -0.8% m/m the prior month. Imports fell to -3.6% m/m vs -0.4% m/m the prior month. Overall a nice trade surplus for the Switzerland.

This week we will have data on employment, quarterly and yearly GDP as well as on economic expectations.

Important events fro CHF:

Monday:

• Employment Level

Thursday:

• GDP q/q
• GDP y/y
• Friday: KOF Economic Barometer

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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.
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