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Australia
Australian Dollar event risk will be elevated this week with a slew of important data to publish. Today’s RBA Cash rate and Monetary Policy statement will hold a lot of the attention with expectations that the RBA will leave rates unchanged at 0.75%. Two rate cuts to the cash rate in 2020 to bring it down to 0.25% is now the talking point to bring the economy more in line with growth forecasts and inflation and employment targets. This of course will be data dependant over the next few months. Yesterday’s Building Approvals release was a bad start to the week with data coming in at -0.8% for October lower than predicted. Seasonally adjusted for October (total Dwellings) fall 8.1% driven by a decrease in private dwellings of 11.3% excluding houses. Watch for strong moves in the Aussie this week but not necessarily in the same direction.
New Zealand
Despite a largely range bound week the New Zealand Dollar performed reasonably well outperforming its peers. The NZ economy of late has shown positive signs especially if we pull aside third quarter Retail Sales and Business Confidence. Depending on how negotiations roll out with China and US officials we could see further upside develop in the kiwi as we head into 2020. This week will be sparse for economic data publications which usually implies the kiwi will take its directional shifts from offshore headlines. Governor Orr speaks on Thursday about the Central Bank Capital review, we are not expecting any surprises.
United States
The US Dollar had a mixed week with risk sentiment wavering but data reasonably supportive. China vowed to retaliate against President Trump’s support of HK protesters with markets waiting to see potential fallout in progress with negotiations. In news out Monday it has been reported that President Trump is expected to hold off raising tariffs on the 15th of December to keep alive recent negotiations but a new report suggests the deal “phase one” has now stalled based on HK legislation and more than likely won’t happen until early 2020. The main issues are how much tariffs to roll back and how China will guarantee to purchase US agricultural products. Although Trump has hinted at lower tariffs he won’t want to change the tariffs he has put into place as this could be seen as a surrender. Its unsure how the will impact currency markets this week with most of the pessimism already priced into crosses. This week’s Non-Farm Payroll and job’s earnings results for November will be the focus.
Europe
Eurozone annual inflation is expected to be 1.0% to November 2019, up from 0.7% in October according to the stats at the European Union beating estimates of 0.8%. The print sent the Euro higher across the board prior to the close of the week. Eurozone unemployment came in at 7.5% bang on estimate for October and down from September’s 7.6% and down from 8.0% in September. This figure is the lowest Eurozone unemployment rate since “Eurostat” figures were first introduced in January 2000. Compared to the same time in 2018 the unemployed in the Eurozone shrank by 761,000. Lagarde speaks in Brussels tonight the weekly highlight with no actual tier one data to release.
United Kingdom
YouGov’s general Election poll, the 50,000 strong surveyed result, has predicted a Conservative landslide victory. The same source also predicted the 2016 hung parliament. The lead of 11% over Labour should reflect a win for Boris Johnson on the 12th December. This potential result of a centre right victory remains to be supportive of the British Pound with polls to intensify more as we get closer to 12 Dec. Another leader debate between BJ and Corbyn is due on 6th December. If this goes well for Johnson markets may start to price in a Conservative win, thus sending the Pound further north. Manufacturing and Services results for November are due this week.
Japan
Chinese manufacturing results yesterday showed a fourth straight month of expansion for November indicating a sharp turnaround in demand. The Caixin Manufacturing Index rose to 51.8 from 51.7 staying above the accepted 50.0 Index level. The news boosted market sentiment into Monday evening trading sessions with the Japanese Yen selling off as investors chose risk products. Capital Spending by businesses for the September quarter came in at 7.1% from the 5.1% predicted Monday with the willingness by Japanese businesses to spend money towards future growth a sign of confidence. Japanese Cash Earnings y/y prints later in the week which is expected to show an increase of 0.2% in wage inflation.
Canada
The Bank of Canada will announce their official Cash Rate this week on Thursday with expectations widely predicted the central bank will leave it unchanged at 1.75%. This Following the October 31st release when they also left rates unchanged saying the inflation rate of 1.9% should remain steady. Nothing really has changed much since. Third quarter GDP to September printed at 0.1% Friday in line with market predictions giving the CAD a little support into the close. Canadian Unemployment is expected to also remain at 5.5% when it’s announced on Friday.
Major Announcements last week:
- NZ ANZ Business Confidence printed better than expected
- Chinese Manufacturing releases up on expectations boosting market sentiment
- Australian Building Approvals m/m releases below expectations
- Aussie Current Account comes in higher at 7.98B from the 6.1B expected
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