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FX Update

Australia

The Australian Dollar is the weakest main board currency over the past 10 days as it has been sold off in risk off flows associated with the coronavirus. Although last week’s employment data highlighted an improvement for December 2019 it offered no relief for the Aussie Dollar as setbacks supporting poor market sentiment have been overwhelming. Add in bushfire costs and we still see a decent chance of a rate cut at the 4th Feb RBA meeting. Looking ahead we have quarterly CPI Wednesday forecast to be 0.6%      

New Zealand

Fourth quarter CPI figures showed a rise to 0.5%, up on the 0.4% expected sighting, increased costs in rental prices and airfares were sighted. This reinforces the RBNZ may not cut rates at the next meeting on 12 Feb given inflation targets fall within the targeted 1-3% over the next 12 months. 82 coronavirus deaths have been reported now with a further 2,700 cases confirmed in mainland China. 50 cases in 13 countries outside China have also been reported with 5 very close to home in Australia concern. This week we have no tier one data on the calendar to consider. Risk flows will dominate movement based on headline news with coronavirus.

United States

It was a quiet week for the US Dollar with no significant economic data printing. Only manufacturing showed moderate expansion of business for the month of January. While trade restrictions may be benefiting the US economy on the whole the latest evidence is suggesting that the manufacturing sector isn’t quite benefiting from Trump’s trade war. Tariffs have increased the cost businesses have to purchase raw products they need for production which has in turn reduced employment in some industries by 1.2%. The Federal Reserve announce their Cash Rate and Monetary Policy this week on Thursday morning – we expect no change from the 1.75% with only small tweaks in policy from the December meeting. Risks to overall growth are still skewed to the downside, we await the Fed chair comments.   

United Kingdom

The UK Unemployment Rate remains stable at 3.8% along with the employment rate which is estimated at 76.3%. Average Earnings also published well up 3.2% from 3.1% showing businesses are paying slightly more for labour.  Boris Johnson’s Brexit deal is one step away from becoming law after the Withdrawal Agreement Bill was passed Thursday morning. The Bill now only needs royal approval for the UK to leave the EU on the 31st of January.  This week’s calendar sees the Bank of England (BoE) publish their cash rate and monetary policy announcement with expectations of a 7-2 vote in favour of rates to stay on hold but after positive employment data chances have increased to around 50%

Europe

The Euro continued its downward slide into Tuesday after ECB Lagarde somewhat dovish comments last week. French and German Manufacturing came in well showing a rise in production growth but flash PMI data for January shows the Eurozone economy has failed to show early 2020 growth. The Euro could face further downward pressure this week as the safe haven US Dollar plays a part with coronavirus impacting markets. The Spanish Unemployment Rate prints and is expected to show a small rise to 14.0%

Japan

The Bank of Japan monetary policy showed Japan’s economy is expanding at a moderate pace and should continue the trend through 2021. Governor Kuroda said they would not hesitate to ease if momentum is at risk of weakening- sighting offshore risks and an upwardly revised 2021 GDP to 1.1% from 1.0%. Japanese Unemployment Rate comes out this week with figures expected to click up to 2.3% from 2.2% 

Canada

The Bank of Canada left the benchmark rate unchanged at 1.75% last week and changed their fourth quarter growth forecast from 1.3% to 0.3% and now predict 2020 growth will struggle to meet the 2.0% target. The chance of a March 4 rate cut has now increased considerably after these results with some speculating a mid-April cut may enter the fold. The Canadian Dollar was hammered post the release over the main board of currencies and has extended declines into today. Monthly GDP prints later in the week.

FX Update

Headlines surrounding the Coronavirus sent markets into a risk off tone Wednesday sending the NZD and Aussie currencies lower. Markets fears eased into Thursday when Chinese officials talked down concerns but further attempts to calm investor confidence failed into Friday with more deaths and reported cases. Equity markets and associated risk products made early gains but fell into risk off Friday.

The English Pound recovered early week losses when employment data published well. The Unemployment Rate remained stable at 3.8% along with the employment rate which is estimated at 76.3%. Average Earnings also printed up at 3.2% from 3.1% showing businesses are paying slightly more for labour. This may dampen expectations of an interest rate cut at next week’s BoE meeting with the probability of a rate cut still around 60%. Boris Johnson’s Brexit deal is one step away from becoming law after the Withdrawal Agreement Bill was passed Thursday morning. The Bill now only needs royal approval for the UK to leave the EU on the 31st of January.     

The Canadian Dollar was in the spotlight Thursday morning- the Bank of Canada left the benchmark rate unchanged at 1.75% but changed their fourth quarter growth forecast from 1.3% to 0.3% and now predict 2020 growth will struggle to meet the 2.0% target. The chance of a March 4 rate cut has now increased considerably after these results with some speculating an April 15 cut may also come into play. The Canadian Dollar was hammered post the release across the board and remains soft into Friday. 

The Bank of Japan monetary policy showed Japan’s economy is expanding at a moderate pace and should continue the trend through 2021. Governor Kuroda said they would not hesitate to ease if momentum is at risk sighting overseas risks and an upwardly revised 2021 GDP to 1.1% from 1.0%.  

New Zealand Inflation for the fourth quarter 2019 published this morning publishing at an annualised growth rate of 1.9% up from the third quarter 1.5% with declines in food prices while airfares and rental costs provided the lifts. This inflation will give the RBNZ confidence in keeping the cash rate at 1.0% when they meet on the 12th of February.

Central Bank’s hold Focus with BoJ, BoC and BoE

Australia

Chinese fourth quarter GDP came in on estimate at 6.0% and Industrial Production was significantly higher than the 5.9% expected at 6.9% assisting the Aussie Dollar late in the week into this morning’s trading. With Chinese imports of Iron Ore at close to record highs in December as well as local production up 12.0% at the same time in 2019 we could see a well buoyant AUD over the coming days/weeks. Also supported by the recent signing of the phase on trade deal between the US and China and talk of phase two underway we should see the AUD well supported for a while if risk sentiment allows. Data this week is limited to the Aussie Unemployment Rate and employment change.

New Zealand

Then New Zealand Consumer Price Index has been rising steadily over the past few years but not quite as fast as recent quarters. The index for the second quarter of 2019 was 1032 (plus 0.6%), rising to 1039 (plus 0.7%) for the third quarter a record quarterly high. The average quarterly rise from 1925 is 318.31 with the average over the past decade at 1018.29 according to statistics. The figures are based on a basket of products and services. Rental increases in various centres across New Zealand particularly over the past year have a big part to play. Fourth quarter CPI is due this Friday the only notable local data which is expected to come in with a 0.4% (1015) rise.

United States

Martin Luther King holiday Monday kicked off the week at snail’s pace. US Dollar value continues to grind higher with a steady flow of decent data. President Trump’s impeachment trial gets underway early this week which all seems a non event. With Trump’s republican majority in the senate there is no way he will be packing his bags. Currently the senate is made up of 53 Republicans, 45 Democrats and 2 Independents. Why the democrats pursued this is strange – he will be acquitted, and that will be that. US housing data published Friday in the form of new residential construction for the month of December showing a rise of 3.9% in new builds or 1,416,000 below the revised November reading of 1,474,000 but 5.8% above the December 2019 number of 1,339,000 a strong rise. These recent figures highlight a return to the mid 90’s housing strength. Federal Reserve’s Harker was on the wires saying the economy was tracking to reach the 2.0% target inflation and achieving economic growth of 2.0% in 2020.

Europe

The European Central Bank met Friday and discussed concerns over negative interest rates to Eurozone households. There has been some optimism since they met back in October 2019 but global bond yields have remained below expectations since mid 2019. The Euro continues to taper off in 2020 versus the US Dollar and the Aussie Dollar. This week we have German Producer Prices and ECB’s Lagarde speech as the main events along with the ECB rate meeting.

United Kingdom

The GBP was the strongest performing main board currency over the past week- up 0.60% against the Australian Dollar. Retails Sales for the three months to December 2019 printed Friday came in lower than we were expecting at -0.6% after 0.5% was predicted. Since these numbers represent Christmas sales it really is a terrible number. Chances are they will cut rates at the next Bank of England meeting on 31st January. This week on the economic calendar we have UK Average Earnings Index numbers with expectations of an annualised three month moving average of 3.1% rise which should fall in line with recent figures representing reasonably consistent labour pay increases.

Japan

The Bank of Japan meet this week to discuss Monetary Policy and Interest Rates. Bank of Japan’s governor Kuroda spoke last week highlighting his positive outlook for the Japanese economy for 2020. However, he said he would not hesitate to ease monetary measures if required. “Japan’s economy is likely to continue on a moderate expanding trend” he said. The Japanese Yen continues to be sold off in 2020 against the big dollar to 110.00- early May 2019 levels as positive US economic data continues to weigh heavy. We will watch any outcome on currencies when Kuroda speaks this week as he often drops hints about future policy and rate changes.

Canada

The Bank of Canada announced their Monetary Policy Report this week and Cash Rate Statement on Thursday with expectations that they will leave the cash rate unchanged at 1.75% for a while. Recent employment data surprised to the upside after dire readings in October and November reflected just how on edge the economic situation is especially with annualised growth is barely at 1.0%. Unemployment showed an improvement dropping to 5.6% which has a fair impact on any decision not to drop the cash rate sooner rather than later along with rising housing markets. Remember the Canadian economy is still the only developed country trading with a inverted yield curve.

Major Announcements last week:

  • Martin Luther King Holiday makes for thin markets Monday
  • UK House Prices lifted from 2.3% in January to be 2.7% y/y
  • UK Retail Sales prints at -0.6% for December from 0.5% expected
  • Chinese Industrial Production lifts to 6.9% from 5.9% expected

FX Update

After years of negotiations and fears of a global recession the phase one trade deal between China and the US has now officially been signed. The deal includes some immediate reduction in tariffs but most will remain in place until phase two has been agreed. The 200B trade deal comprises of 40B of US agricultural products, an increase of the previous 24B the two parties were working off from 2017.  Most of this will come in the form of Soybean with China needing to buy around 80% of the total US produced supply. 77.8B in US manufacturing products like cars, aircraft and machinery, 524B in US oil and gas, 37.9 in financial services which includes protections over intellectual property.  Equity markets charged to fresh highs as a result of the agreement with overall sentiment improving with currencies mostly weirdly unchanged post headline news.

President Trump’s impeachment trial gets underway early next week which all seems a waste of time. With Trump’s republican majority in the senate there is no way he will be packing his bags. Currently the senate is made up of 53 Republicans, 45 Democrats and 2 Independents. Why the democrats pursued this is baffling – he will be acquitted, and that will be that.

The Bank of England Board has recently been discussing the prospects of cutting the cash rate on the 31st of January to allow for uncertainty and potential economic disruption post Brexit. The EU and UK have until the end of 2020 to agree on the terms for a trade agreement. Boris Johnson has vowed to “get Brexit done” by December 2020, however a government report suggests this transition period of 11 months won’t be long enough. The report also warned that businesses won’t be ready and agreeing on the terms of the new relationship with the EU will take years to sort. This is before we add in Northern Island complexities.

FX Update

Australia

Data out of Australian has been positive to start 2020 with a “triple data boost” taking the Aussie off early 2020 lows. Last week’s Building Approvals printed a whopping 11.8% based on forecasts of 2.1% and Trade Balance rose to 5.8B surplus from the predicted 4.1B we were expecting. Also, Aussie Retail Sales closed the door on a buoyant week of support for the currency after figures showed a print of 0.9% growth for December Sales from the forecast 0.4%. This week could see further buyers of AUD push the currency over 2020 opening cross prices. Chinese Trade Balance today and later in the week when yearly GDP prints could be the main drivers. Iron Ore prices are holding steady around 93.50 from the 2020 open of 92.58. 

New Zealand

Happy New Year to all our Direct FX clients and readers.   

The 2019 festive season was less volatile than the previous year but we still had thin trading conditions with decent swings taking place. It will take a couple of weeks before currency pairs are back in full swing with regular volatility as market participants filter back into markets. The New Zealand Dollar over the course of 2019 was stronger than the Australian Dollar and the Euro but weaker than all other majors. The kiwi has started 2020 on the back foot slipping from recent highs due to risk factors. Tier one data in 2020 starts this week today when NZIER Business Confidence releases.

United States

The US Dollar is the strongest currency performer over the past week with the Index improving from its early January lows. Friday’s Non-Farm Payroll release printed slightly weaker than the predicted 160,000 jobs at 145,000 with downward revisions of 14,000 each month for November and October. Average Hourly Earnings came in at 0.1% from 0.3% predicted and the unemployment rate was unchanged at 3.5%. These numbers were seen as largely benign and somewhat boring. This will give the Fed further optimism to keep their view that no change to policy is required. It seems recent threats by both the US govt and Iran has turned into a storm in a teacup with both sides opting out of a war scenario for now. Consumer Price Index and Retail Sales are the anticipated economic events of the week.

United Kingdom

The Bank of England Board has recently been discussing the prospects of cutting the cash rate on the 31st of January to allow for uncertainty and potential economic disruption post Brexit. The EUI and UK have until the end of 2020 to agree on the terms for an trade agreement. Given it’s already taken over 3 years to get to this point this timeframe may seem a long way out but it’s not. Also, the EU have said they won’t be rushed into making a deal just because it’s convenient for the UK – currently Boris Johnson has not made any allowances for any extension past 31 December. This was voted in by MP’s last week and now must get the nod from the house of lords before being law. UK CPI y/y and Retail sales for December publish this week.

Europe

Eurozone CPI Estimate for December published at 1.3% meeting expectations and beating November’s 1.0%. The Euro lost a chunk of its value over 2019 against a broad range of currencies based on poor economic data, international trade concerns and political risks. During late September the currency hit a yearly low versus the big dollar at 1.0900 as economic conditions in Germany weighed on prospects along with the ECB risk of further easing to monetary policy. Many analysts believe 2020 will be a better year for the Eurozone with more support for the EUR. Expectations are that the Euro could be trading about 1.15 by the end of the year against the Dollar- especially if the US election brings surprises. Against the NZD we expect prices to pivot around the 0.6000 area for most of the year.

Japan

The Japanese Yen has reversed late 2019 gains across a raft of currency pairs into 2020 with the currency the worst performer last week. With tensions easing in US/ Iran and a benign US Non-Farm Payroll reading ending the week, investors exited Yen and bought back risk related assets. Optimism surrounding the US/ China trade deal has also added a better mood with investors and not to mention higher equity prices have driven economic sentiment. The Japanese current account will be up around 1.8T- anything less than this could impact the Yen    

Canada

Despite favorable employment data out in Canada early Saturday morning the Canadian currency was strangely unmoved. Jobs numbers showed an improvement from the 24,000 people who entered the workforce to 35,200 and the Unemployment Rate dipped from 5.8% to 5.6%. These represent good numbers BUT, with the Canadian Economy still trading in a negative/ inverted yield curve – the worst since 2000, this should spark the Bank of Canada to drop the cash rate. The 10-year government bond is 40 points below the 3 month rate as an example. The only reason the BoC did not drop rates on the 5th of December is they are tracking around the 2% inflation target. The next monetary policy release is January 23rd with good enough reason we believe based on the inverted yield to cut rates to 1.5%. No data on the Canadian calendar this week.  

FX Update

Happy New Year to all Direct FX clients and readers. 

The 2019 festive season was less volatile than 2018 but we still saw a fair amount of thin trading conditions with some reasonable swings taking place.

It will take a couple of weeks yet before currency pairs are back in full swing with regular volatility as market participants filter back into markets. 

The New Zealand Dollar over the course of 2019 was stronger than the Australian Dollar and the Euro but weaker than all other majors. The Euro turned out the worst performance, with the Canadian Dollar holding a staggering first place even though it’s the only currency to carry a negative yield.

The kiwi has started 2020 on the back foot underperforming on risk factors, the worst performing currency. Tier one data starts next week with NZIER Business Confidence.

We saw a big turnaround in the Global Dairy Auctions with results showing a rise of 2.8% in the overall index from mid December’s negative 5.1% with solid numbers in Butter Milk and Whole Milk Powder products. 

Thursday’s mood turned positive with equities bouncing back from losses after improved appetite for risk after Geo-Political uncertainty eased. President Trump and Iran confrontations calmed after the US assassination of Qassem Soleimani, Iran’s most powerful military leader. Iran has said they would retaliate but Trump made comment that any come back would be met by the US targeting “Iranian Culture Sites”. This implies committing war crimes – but is most likely to just be threats. 

Data out in the US showed the Trade Deficit shank to 43.1B for November making the lowest level during the Trump administration since October 2016 from 46.9B. US Manufacturing index data rose in December to 55.0- This is particularly evident given Manufacturing has been part of the backbone to the rise of the US economy over recent months. Week’s end US Non-Farm Payroll is the focus with Unemployment expected to remain at 3.5%

GBP Fireworks Ahead

Australia

News out of Australia has been largely lacklustre over the last week with Australian markets having had to digest conflicting data- the bumper US jobs numbers on Friday, galvanising confidence in the market regarding the health of the US economy going into 2020. Then, Chinese trade balance data, which revealed a surprise fall in exports, and reminded the market that China’s economy is still feeling the ill effects of its trade-war with the United States. Business confidence data out later this afternoon will be the driver of the AUD with China PPI and CPI later in the afternoon also capable of providing further direction.

New Zealand

The NZD has continued to hold onto gains made last week, grinding to a high against the USD of 0.6576 last Friday. A minor pullback Monday after a mixed overnight session with the NZD/USD now around 0.6552 US-China trade remained in focus as markets looked for signs of progress before a fresh round of tariffs are set to take effect on 15 December. Locall focus is on tomorrow’s Half-Year Economic and Fiscal Update. The NZD looks well supported at current levels but new US tariffs on Sunday, if implemented could dent market confidence in the trading/risk currencies leading to further pullbacks in risk sentiment.

United States

US markets opened the week on a positive note after the much better than expected Non-farm payroll figure last Friday at 266,000 jobs (expected 180,000) created for the November month along with a further reduction in the unemployment rate down to 3.5% from 3.6% with broad- based across most industry sectors. This has seen US equity markets rally sharply along with the US dollar as markets pared  back expectations of further Fed rate cuts. Better direction will be gained this  Thursday when the US central bank the Fed, at its final meeting for the year will release its rate decision…no rate cut is expected but as always the market will closely look at the subsequent press release to see if any forward projections have been changed. Taking a back seat over the last week has been the SIno/US trade talks , with little concrete news but the tone appears more confident that at least a “phase 1” deal may be reached before Christmas, but whether this will be enough to stop the automatic imposition of more US tariffs this Sunday,15th December remains to be seen…If the new tariffs go ahead this would be seen as a negative for risk trades and should further benefit the USD.

Europe

The last meeting for 2019 of the ECB will be held on Thursday with a press conference to follow. This will be the first ECB meeting with  Christine Lagarde presiding over her first rate decision amid a growing dispute over the bank’s loose monetary policy. While Lagarde is a dove that supported Quantitative Easing and low interest rates, she has struck a calm tone in her first public appearances. The French politician will aim to bring more unity  to the bank and is unlikely to make any radical decisions…no rate change is expected , but look for comments on “governments to do more” similar to Draghi’s previous statements.
After a bout of negative data, some positive news overnight from Germany unveiling its October Trade Balance, which posted a trade surplus of €20.6B. Imports in the month were unchanged against a 0.1% decline expected, while exports increased by 1.2%, much better than the -0.3% forecast.  October industrial production for France, Italy and the UK is released tomorrow and this will be closely watched for any evidence of a basing in the slump outside of Germany. 

United Kingdom

All eyes this week on the outcome of the general election on Thursday. The GBP has firmed over the last week as polls have indicated that a Conservative victory is likely, however over the last few days this margin has started to erode and given the lack of accuracy of the predicted outcome of the 2017 election market action is likely to become more volatile.
Any result that does not show a clear Conservative majority should see a sell-off in the GBP as more uncertainty will erode business and investor  confidence. we expect choppy trading leading up to Thursday’s result …Friday morning NZ time should see the first results.

Major Announcements last week:

  • US Non Farm Payroll surprised at a whopping 266,000 new jobs
  • US Unemployment rate clicks lower to 3.5% from 3.6%
  • Aussie Retail Sales drags on the AUD
  • Canadian Unemployment goes higher to 5.9% (previous 5.5%)

Economic Releases

Below are the weekly economic releases for this week (NZT)

Tuesday 10/12

  • 1105am, AUD, RBA Gov Lowe Speaks
  • 11pm, EUR, German ZEW Economic Sentiment
    • Forecast 1.1
    • Previous -2.1

Wednesday 11/12

  • 11th-15th, CNY, New Loans
    • Forecast 1200B
    • Previous 661B

Thursday 12/12

  • 230am, USD, CPI m/m
    • Forecast 0.20%
    • Previous 0.40%
  • 230am, USD, Core CPI m/m
    • Forecast 0.20%
    • Previous 0.20%
  • 8am, USD, FOMC Economic Projections
  • 8am, USD, FOMC Statement
  • 8am, USD, Federal Funds Rate
    • Forecast <1.75%
    • Previous <1.75%
  • 830am, USD, FOMC Press Conference
  • All Day, GBP, Parliamentary Elections

Friday 13/12

  • 145am, EUR, Main Refinancing Rate
    • Forecast 0.00%
    • Previous 0.00%
  • 145am, EUR, Monetary Policy Statement
  • 230am, EUR, ECB Press Conference
  • 630am, CAD, BOC Gov Poloz Speaks

Saturday 14/12

  • 230am, USD, Core Retail Sales m/m
    • Forecast 0.40%
    • Previous 0.20%
  • 230am, USD, Retail Sales m/m
    • Forecast 0.40%
    • Previous 0.30%

FX Update

Currency markets this week have taken on more turns than a wounded snake. US Trade policy has been high on the agenda again with most currencies up Thursday against the US Dollar.  

After President Trump said earlier in the week a deal with China would not be done until after the election in 2020 he commented that talks between the two sides are now going “very well”. Negotiations of the “phase one” deal are now expected to be completed before tariffs are set to increase on December 15. Earlier in the week the President said he would levy Argentina, France and Brazil with the aim of protecting US workers. The flow on effect of Trump’s tariff war on the world may end up hurting the competitiveness of US manufacturers further, after all this sector is currently in a recession after contracting in November for the fourth month straight driven by these tariff tensions and global growth.

As predicted the Reserve Bank of Australia left their cash rate unchanged at 0.75% with the board saying they are prepared to ease policy further should the economic situation worsen. The decision came across a little more hawkish than we have seen in the past based on improving house prices and the potential to lift household spending. Calls for the RBA to cut again as early as February will be monitored by incoming data.

The New Zealand Dollar rose across the board yesterday after the Reserve Bank of NZ will instigate plans to nearly double the amount banks are currently required to hold as capital from 8.5% to 16%. Large banks will need to hold 18% in total capital with smaller banks 14%. The amounts are a lot and equate to about 24 Billion NZ Dollars worth but Orr said “more capital also reduces the likelihood of a bank failure”. The time allocated for this was stretched out from 5 years to 7 years.

Market overview

NZD Surges Higher

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