Forex Major Currencies Outlook (Nov 15 – Nov 19)

USD 

Inflation continues to run rampant in October. Headline CPI number came in at 6.2% y/y vs 5.8% y/y as expected while core CPI came in at 4.6% y/y vs 4.3% y/y as expected. Gasoline and energy were the biggest contributors along with prices of used cars, but other categories also showed increases in prices indicating that inflation pressures are widely spread. Inflation readings are at 30-year highs with no signs of stopping. Some analysts see headline number climbing to 7%. Rampant inflation should see Fed increasing their QE taper starting from January of 2022 with possibility of ending it by the end of Q1 2022. Markets are now pricing in a greater probability of a June 2022 rate hike. San Francisco Federal Reserve Governor, Mary Daly stated that inflation is “eye popping” but still consider it transitory. 

This week we will have consumption data, expected to show a modest decline from the September reading. 

Important news for USD: 

Tuesday:

• Retail Sales 

EUR 

ZEW survey for November showed a big drop in current conditions for German economy. The reading came at 12.5 vs 18 as expected and down from 21.6 in October. Ongoing supply chain constraints coupled with rising price pressures weighted heavily on the current conditions. On the other hand, expectation category showed a jump to 31.7 from 22.3 in October indicating that German financiers see improvements in the coming months. Eurozone expectations category shared the similar assessment and came in at 25.9, up from 21 the previous month. 

European commission went out with new economic projections. They now see 2021 GDP at 5% vs 4.8% previously. Growth for 2022 has been reduced to 4.2% from 4.5% as previously seen while GDP for 2023 is left unchanged at 2.4%. On the inflation front, inflation for 2021 is seen at 2.4%, up from 1.9% previously. For 2022 they see inflation at 2.2%, up from 1.4% previously while inflation for 2023 is unchanged at 1.4%. 

This week we will have a second estimate of the Q3 GDP. 

Important news for EUR: 

Tuesday:

• GDP 

GBP 

Preliminary Q3 GDP came in at 1.3% q/q vs 1.5% q/q as expected. Private consumption was up 2% in the third quarter while business investment was up 0.4%. The largest contributors were hospitality (30%), arts and recreation (19.6%) and health (3.5%) as parts of the further reopening of the economy. 

This week we will have employment, inflation and consumption data. All three will have a significant impact on BOE and their potential decision to hike rate at their December meeting. Employment will show the strength of the labor market post-furlough scheme. 

Important news for GBP: 

Tuesday:

• Claimant Count Change
• Unemployment Rate

Wednesday:

• CPI

Friday:

• Retail Sales 

AUD 

Employment data for October was abysmal. Employment change came in at -46.3k vs 50k as expected. The unemployment rate jumped from 4.6% in September to 5.2%. Only a mild jump to 4.8% was expected. Participation rate rose to 64.7% from 64.5% the previous month but markets were expecting it to go to 64.9%. Full-time employment dropped -40.5k while part-time was at -5.9k. AUD was pummeled on the release but it seems that survey was done before the reopening in the state of Victoria so it failed to take that into account. November report will provide us with a clearer picture of labor market conditions. 

October trade data showed China set a new record surplus of $84.5bn. Exports have risen 27.1% y/y while imports came in at 20.6% y/y, weaker than expected but still rising faster than in the previous month. Recent changes in government policies impacted incomes and could lead to further deterioration in demand thus negatively impacting imports. Exports are expected to stay high as incoming holiday season will lead to increase in demand for goods from China. Additionally, rising exports may signal easing of supply chain constraints. Overall we see net exports increasing in Q4 and being a positive contributor to the GDP reading. Both inflation data for the month of October jumped. CPI came in at 1.5% y/y, up from 0.7% y/y in September while PPI came in at 13.5% y/y, up from 10.2% y/y the previous month. Increase in energy and raw material prices led to jump in PPI and we can see those costs spilling over into the CPI. Non-food prices were the biggest contributor to the rise in CPI coming in at 2.4% y/y. 

This week we will have production and consumption data. 

Important news for AUD: 

Monday:

• Industrial Production (China)
• Retail Sales (China) 

NZD 

Electronic card retail sales, which covers around 70% of retail sales, rebounded in October and came in at 10.1% m/m vs 0.9% m/m in September and -7.6% y/y vs -14.9% y/y the previous month. Data from New Zealand continues to improve as economy is firing on all cylinders and we can expect to see yet another strong quarter with a 25bp rate hike from RBNZ. 

CAD 

Oil posted a third consecutive week of declining prices. The price is holding above the $80 level but the streak is of little help to CAD. Coupled with USD strength after huge CPI reading and USDCAD rallied hard and the pair is be seen at levels not seen since October 6. With QE being removed and strong economic data from Canada prompting BOC to state that output gap should be closed in middle quarters of 2022, CAD should be buy on dips. 

This week we will have inflation and consumption data. 

Important news for CAD: 

Wednesday:

• CPI

Friday:

• Retail Sales 

JPY 

PPI data for October came in at 1.2% m/m and 8% y/y. The yearly figure represents a 40-year high, highest since January of 1981, for the reading. Rising cost pressures, especially fuel related, in combination with timber goods were the main culprits. Weak JPY also contributed to the rise of prices of imported goods. Transmission of these prices to consumers could have a big impact since wage growth is weak. Newly appointed Prime Minister Kishida announced his plans to deliver a range of cash payouts to households as part of a fresh stimulus package. 

This week we will have a preliminary Q3 GDP reading that is expected to come in negative and induce a further stimulus from the government. 

Important news for JPY: 

Monday:

• GDP 

CHF 

Seasonally adjusted unemployment rate for October ticked down to 2.7% from 2.8% in September thus continuing the trend of falling unemployment. Labor market has been tightening every month since July. SNB total sight deposits for the week ending November 5 came in at CHF718.4b vs CHF717.1b the previous week. With EURCHF spending the entire week below the 1.06 level SNB is ramping up its activities in the market, buying EUR, in order to lift the pair to more appropriate levels.

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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. Please remember that our accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.}