Forex Major Currencies Outlook (Nov 30 – Dec 4)

USD 

Preliminary durable goods orders for October came in at 1.3% m/m vs 0.9% m/m as expected. Core capital goods have also beaten expectations coming in at 0.7% m/m vs 0.5% m/m as expected. These data will help upgrade Q4 GDP projections. The Second Estimate for Q3 GDP came in unchanged at 33.1%. Headline PCE came in at 1.2% y/y as expected but down from 1.4% y/y in September while core PCE came in at 1.4% y/y as expected vs 1.5% y/y in September. Inflation moving in the wrong direction even after Fed announced that they will let it stay above 2% for prolonged period of time (AIT). Personal spending came in at 0.5% vs 0.4% as expected but personal income plunged to -0.7% vs 0.4% as expected. We can yet again see the drop when the unemployment benefits dried out. 

FOMC meeting minutes showed talks about future direction of QE program. It should be noted that November meeting was held before the vaccine announcement which should put breaks on Fed’s QE action. Former Chair of the Fed, Janet Yellen, is set to be the first female Treasury Secretary. She will likely push for more fiscal stimulus and she is a proponent of free trade which gave markets reason to cheer and go into risk on mode. 

This week we will have ISM PMI data as well as NFP. Forecasts are for a headline number of around 550k while the unemployment rate should tick down to 6.8%. 

Important news for USD: 

Tuesday:

• ISM Manufacturing PMI

Thursday:

• ISM Non-Manufacturing PMI

Friday:

• NFP
• Unemployment Rate 

EUR 

Preliminary November PMI data showed a pain in services sector inflicted by the lockdown. Eurozone services came in at 41.3 vs 42 as expected dragged down by French reading of 38. German services fared much better but sill fell to 46.2 from 49.5 in October. Manufacturing continued to show resilience coming in at 53.6 for the Eurozone. The reading was helped by still strong German reading of 57.9 while French reading slipped into contraction with 49.1. Composite was dragged down by services to the 45.1 level. Data here shows predicts return to negative GDP in Q4, however due to the manufacturing sector strength we do not expect it to be a double-digit dip. 

This week we will have preliminary November inflation figures. 

Important news for EUR: 

Tuesday:

• CPI 

GBP 

UK preliminary November PMI numbers showed a surprising jump in the manufacturing sector, coming in at 55.2 vs 50.5 as expected and up from 53.7 in October. Services, on the other hand, plunged to 45.8 from 51.4 in October, but also beat expectations of 42.8. Composite was 47.4 vs 42.5 as expected. Markit notes that hospitality business have suffered the hardest hit while rise in manufacturing was propped by “inventory building and a surge in exports ahead of the UK's departure from the EU at the end of the year.” 

AstraZeneca clinical trail showed the efficacy of its vaccine at 70%. However, they state that smaller dose of its vaccine is needed. Only 1.5 shots instead of 2 are 90% efficient. Additionally, the material can be stored in regular fridge temperature and the firm says it can produce three billion doses next year. Both smaller dosage and smaller storing temperature give it edge over Pfizer/BioNTech and Moderna vaccines. UK government has an agreement to purchase 100 million doses, which theoretically should be sufficient for vaccination of 66 million people. 

Brexit deal is still not finalised, question about fisheries remain, but investors are calculating that a great majority of the matters is agreed upon. BOE stated that exit without a deal would inflict more long-term damage to the economy than the virus. Office for Budget Responsibility projects a contraction of -11.3% GDP in 2020 from -12.4% and smaller rebound in 2021 (5.5% vs 8.7% projected in July). 

AUD 

RBA deputy governor Debelle stated that they do not expect rate cut for at least 3 years as they have to be careful not to remove the stimulus too early since economy is still fragile. He added that low interest rates are underpinning asset prices and that he is not convinced that negative rates would work. Finally, he sees a lot of uncertainty surrounding the economy and it will take time to bring it to the pre-pandemic levels. 

This week we will have Q3 GDP and RBA meeting from Australia. There are no expectations for further action by RBA after they altered the rate and QE program at the last meeting. China will publish official and Caixin PMI data. 

Important news for AUD: 

Monday:

• Manufacturing PMI (China)
• Non-Manufacturing PMI (China)
• Composite PMI (China)

Tuesday:

• RBA Interest Rate Decision
• Caixin Manufacturing PMI (China)

Wednesday:

• GDP

Thursday:

• Caixin Services PMI (China)
• Caixin Composite PMI (China) 

NZD 

Q3 retail sales were published over the weekend and we got quite a beat. The reading came in at 28% q/q vs 19% q/q as expected. Economic data from New Zealand continues to improve at a faster rate than expected and diminished dovish rhetoric from RBNZ should add more wind to the free rise in NZDUSD and push it over the 0.70 level. New Zealand government suggested that housing prices should be included in RBNZ mandate. Since housing market benefited most from low rates, which lead to rises in housing prices, this move could lead to rate hikes to fight off the overheating price. Kiwi reacted positively to the news and shoot toward the 0.70 level crossing it briefly before returning below it. During the week it hovered around the 0.70 level. RBNZ Governor Orr stated that they are paying close attention to asset prices but that low interest rates are currently essential as they promote spending and investment. 

CAD 

Average weekly earnings in September came in at 6.9% y/y vs 7.91% y/y in August. Governor Macklem confirmed that rates will stay low for a very long time. Inflation is projected to stay under 2% until 2023. He added that negative rates would not be very helpful in today’s conditions and that BOC will stop QE program once the recovery is well under way. Canadian Dollar enjoyed the risk on mood in the markets with USDCAD pushing the 1.30 level and falling beneath it on several occasions. The level proved to be a strong support from further drops. 

This week we will have September GDP and Q3 GDP data as well as employment data. 

Important news for CAD: 

Tuesday:

• GDP

Friday:

• Employment Change
• Unemployment Rate 

JPY 

Deflation is deepening in Japan. Headline inflation number for Tokyo area for November came in at -0.7% y/y vs -0.3% y/y in October. Ex fresh food also dropped to -0.7% y/y from -0.5% y/y the previous month while ex fresh food, energy measure kept steady at -0.2% y/y. Yen was battered during the week due to the risk on mood and managed to claw back some of the losses against most majors as the week progressed. 

This week will have consumption data, preliminary October industrial production and employment data as well as data on CAPEX for Q3. 

Important news for JPY: 

Monday:

• Retail Sales
• Industrial Production

Tuesday:

• Unemployment Rate
• Capital Spending 

CHF 

SNB total sight deposits for the week ending November 20 came in at CHF707.3bn vs CHF707.9bn the previous week. Vaccine induced risk on mode in the markets from the past week helped SNB fight off the Swissy strength so there was no need for them to intervene in the open market. 

This week we will have consumption, inflation and Q3 GDP data. 

Important news for CHF: 

Monday:

• Retail Sales

Tuesday:

• GDP

Wednesday:

• CPI

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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.}