Global market watch - 11th December 2017
The Greenback is still on firm footing from a positive move on technical trading last week, although it started to slip early Friday when Average Hourly Earnings came in at 0.2%, rather than some analyst’s expectations of 0.3%. This component of the US Employment Report is a favored Fed inflation gauge. The Non-Farm Employment Change number was better than anticipated, but there was a downward release to last month’s figure. Ultimately, the Dollar is on firmer footing against all of its rivals after last week, but is off some of the peak levels against some of its major counterparts. That said, the Buck did hit a fresh one-month peak against the Yen overnight.
The Fed has been given a 95% probability of hiking interest rates 25 bps to a range of 1.25-1.5% by the market on Wednesday afternoon at 2pm ET. Traders will be eyeing economic forecasts, dot plots showing the Fed’s desire to raise rates next year, and outgoing Fed Chair Janet Yellen’s press conference at 2:30pm for clues into future guidance on FOMC policy and the timing of the next rate hike.
In addition to the Federal Reserve meeting and US CPI MoM on Wednesday, we have US PPI tomorrow, Core Retail Sales on Thursday, and the Empire State Manufacturing Index on Friday.
The Canadian Dollar is trading essentially sideways from Friday, but was much lower after the Bank of Canada (BoC) meeting revealed a more cautious tone than expected. Ultimately, the BoC is likely to raise rates in the near future, but they have a history of attempting to talk down the currency given the importance of trade with the US to the Canadian economy. Further, recent contentious NAFTA talks lend an air of uncertainty, and there are some legitimate concerns about the Canadian housing market and consumer debt. That said, the Canadian data has been very strong, reflecting higher growth, robust employment figures, and, ultimately, supportive of higher BoC interest rates.
We have NHPI MoM data Thursday morning, with BoC Governor Stephen Poloz speaking that afternoon, and Manufacturing Sales data MoM Friday.
The Euro edged up a little on the modest US Dollar sell-off but lost a significant amount of ground versus the Buck last week, with concerns regarding the European Central Bank (ECB) meeting this Thursday. While market participants expect no change to interest rates by the ECB, and they already unfolded their asset purchase plans, traders are always interested in ECB President Mario Draghi’s post-meeting press conference. There has been some conflicting guidance from the region’s central bank, but, in general they have maintained the need for an accommodative policy for the near future which is more dovish than the market’s expectations had been starting in June. It seems that an ECB rate hike in the near future is almost out of the question, while the expected “winding down” of Central Bank asset purchases will also be drawn out.
In addition to the all-important ECB meeting on Thursday, the German ZEW Economic Sentiment Survey is due tomorrow along with a speech by ECB President Draghi, and on Wednesday we have German Final CPI MoM along with Eurozone Employment Change QoQ.
Sterling traded up to a seven month high on its trade weighted average last week after the Brexit good news, which is expected to be confirmed at the EU summit this week. However, Cable could not maintain the upper end of its ranges, which implies the market expected an agreement to be reached on time. This is really the last week of trading before the holidays begin, and we have the Bank of England (BoE) monetary policy meeting along with the European Union summit this week. While they both have the potential to surprise positively, the probabilities of actually doing so are low. The BoE raised interest rates last month but included cautious guidance due to Brexit uncertainty, despite relatively high UK inflation. Meanwhile, the EU summit includes the rubber stamping of last week’s EU- UK agreement. It was interesting to note that David Davis over the weekend spoke about the agreed Brexit sum not being paid if a trade deal was not achieved.
Along with Thursday’s BoE monetary policy meeting, we have UK CPI YoY tomorrow, the UK Employment Report - including their key Average Earnings Index 3m/y- on Wednesday, and Retail Sales MoM on Thursday as well.
The Aussie Dollar rebounded a bit last night on higher oil, gold (although it spiked and fell), and copper prices overnight after it fell to a six-month low last week on a spate of worse than expected recent Australian economic data, including last month’s Wage Price Index and employment figures, and a GDP miss and soft trade balance number last week. We have NAB Business Confidence today, RBA Governor Lowe speaking tomorrow, and the key Australian Employment Report Wednesday. The Kiwi has had a different trajectory, hitting a fresh two-week peak versus the peak this morning as the Aussie’s woes were data specific. We have New Zealand FPI Mom tomorrow afternoon local time.
The Swiss Franc rebounded from Friday’s one-month low versus the Buck ahead of the Swiss National Bank monetary policy meeting on Thursday. No change is expected, but market participants will be looking to SNB Chairman Thomas Jordan’’s post-meeting press conference for clues to any monetary policy input. He has been very dovish recently and is vocally supportive of the SNB negative interest rate policy.
The Japanese Yen fell to a fresh one-0month low overnight before recovering a bit on a slight drop in US interest rates along with some general USD selling ahead of the Fed meeting this Wednesday. We have Japanese PPI YoY this afternoon, Core Machinery Orders MoM tomorrow, and the Tankan Manufacturing and Non-Manufacturing Indices Thursday night.