GBP higher, outlook remains poor. What's ahead this week?
After a quite week for the major currencies last week, market move into a week full of data releases, and anticipated volatility.
Importantly, overnight Chinese data outperformed – factory activity recovering to the fastest rate in 3yrs, adding to weekend data showing the official factory gauge returning to growth due to domestic demand. Although the data does have weak elements, it is a welcome recovery, pushing stocks higher. Hopes of a ‘phase 1’ trade deal remain, but the timeline has been pushed back, as concrete evidence is hard to come by.
AUD: Buoyed ((AUD/USD at 0.6775), as were Asian stocks and oil. Tomorrow Interest rate decision is expected to show rates unchanged, but the statement will be interesting, with GDP data following on Wednesday.
CAD: Interest rate decision and statement on Wednesday will be the key for year-end positioning for an economy divided between a reliance on the energy sector, and needing to gather steam though the global slowdown. Friday’s employment data will also give us medium term direction.
USD: The snowstorms across the US during Thanksgiving weekend (900 flights cancelled) will hit consume demand and spending, but Decent numbers from Black Friday look to be eclipsed by today’s Cyber Monday shopping madness. We will wait for retail sales data and profitability numbers to see if the US economy is riding out its recent slow-patch. EUR/USD hovering at 1.1000 as we go into this weeks data:
Monday: PMI data
Wednesday: Services data
Thursday: Factory data, speeches and jobs data
Friday: monthly employment data – likely to be the most volatile day of the week
EUR: ECB Chair Lagarde’s testimony at the EU Parliament later will be watched, the market looking for signs of direction from the ECB’s new chief.
On Wednesday, we have month-end PMIs – the market needs to be re-assured that the economy is rebounding. This summary from FXStreet give a good overview:
“The euro, in the meantime, is expected to keep tracking developments from the US-China trade dispute as well as USD-dynamics. On the more macro view, the slowdown in the region appears far from abated despite some positive results from key fundamentals in Germany as of late. This does nothing but justify the ‘looser for longer’ monetary stance by the ECB and the cautious/bearish view on the European currency in the medium term.”
Thursday: Annual and quarterly GDP numbers
GBP: As the Conservatives maintain a lead in the polls, GBP continues to strengthen, at 1.2900 vs USD and 1.1700 vs EURO. This is despite the CBI making downward revisions to growth forecasts in the UK: 1.3% in 2019 / 1.2% in 2020 / 1.8% in 2021 assuming a trade deal with the EU is relatively close to existing arrangements!
Expected UK manufacturing numbers were halved (from 0.6% to 0.3% growth), adding yet more dismal predictions to medium term UK data. As 12th Dec approaches, all polls will have an impact, but GBP will gain from Conservative strengthening their position – it seems the market wants / needs Brexit to end, in whatever fashion.
GBP/EUR at 1.1700 near 3yr highs, but the medium-term continues to look dismal.