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Forex Major Currencies Outlook (Dec 23– Dec 27)

Holiday lull dominates the markets, liquidity will be thin so volatility may be increased, therefore we would advise you to use tight stop losses and trade small lot sizes.

USD

Stronger than expected industrial production and housing data propelled Atlanta Fed’s GDP tracker for Q4 GDP to 2.3% from 2% the previous week.November PCE came in at 1.5% y/y as expected and up from 1.4% y/y the previous month while core PCE came in at 2.1% y/y also as expected. Personal income came in at 0.5% m/m vs 0.3% m/m as expected and up from flat the previous month while personal spending came in at 0.4% m/m as expected. The rise in income is very encouraging and due to the fact that it is close to the holidays it will positively impact December retail sales. Boeing announced that it will halt the production of their 737 MAX model which in turn will shave around 0.5% of Q1 GDP in 2020.

This week we will have housing and durable goods data.

Important news for USD:

Monday:

  • New Home Sales

Tuesday:

  • Durable Goods

EUR

Preliminary December manufacturing PMI in Eurozone came in at 45.9 vs 46.9 the previous month thus reversing back deeper into the contraction territory. German manufacturing resumed the drop shattering the illusion that the worst is over. Services PMI came in at 52.4 vs 51.9 the previous month which helped keep the composite PMI steady at 50.6. Ifo business climate came in at 96.3 vs 95 the previous month indicating recovery in sentiment. This needs to be backed by positive data in order for economy to recover. Ifo economist state that German industrial sector is still in recession and that it will take time for it to recover. Consumer confidence turned sour at the end of the trading week coming in at -8.1 vs -7 as expected and -7.2 the previous month.

GBP

December PMI numbers show manufacturing slump to 47.7 from 48.9 the previous month. Services also declined coming in at 49 vs 49.3 the previous month thus dragging the composite reading deeper into contraction at 48.5 vs 49.3 the previous month. Both core and headline CPI came in unchanged in November at 1.7% y/y and 1.5% y/y respectively. Retail sales came in at -0.6% m/m vs 0.2% m/m as expected. Although it is a poor reading it should be noted that due to the calendar date Black Friday sales were not included. They will be included in December report.

Employment change in October came in at 24k vs -14k as expected with prior month being -58k. The unemployment rate stayed at 3.8%. On the other hand, average weekly earnings came in at 3.2% vs 3.4% 3m/y as expected and down from 3.7% 3m/y the previous month. The employment rate rose to new record high of 76.2%. Overall mixed reading indicating waning wage pressures but tight conditions in the labour market. Q3 GDP came in at 0.4% q/q vs 0.3% q/q due to stronger services.

BOE has left the bank rate unchanged at 0.75% with a vote of 7-2 as was widely expected. They stated that it is too early to tell how much policy uncertainties have declined since the election. “If global growth fails to stabilise or Brexit uncertainties remain entrenched, monetary policy may need to reinforce expected UK recovery”. Basically, they are saying that they will continue monitoring the developments and then decide on the proper course of action.

According to the UK press PM Johnson will guarantee Brexit by the end of 2020 regardless whether the trade deal is agreed upon or not. This increases the chance of a No deal Brexit since UK wants to sign a deal similar to the one Canada has with EU. It took Canada and EU 7 years to work out the details of the deal and additional one to ratify it so it is very optimistic to think that UK would be able to do it by the end of 2020. Head of the FCA Andrew Bailey will be the new BOE governor starting from March 16 2020. His stance regarding Brexit is similar to government’s and he will continue in Carney’s footsteps regarding monetary policy.

AUD

RBA minutes from December showed that board members agreed to reassess economic outlook at February meeting. They have the ability and are ready to ease further if need arises and incoming data disappoints. Extended period of low interest rates is necessary to meet employment and inflation targets. It was reiterated that economy appeared to have reached a gentle turning point. The overall tone was dovish with the main theme being “wait and see” for the incoming data before making a decision.

Employment change in November came in at 39.9k vs 15k as expected and a big rebound from -24.8k the previous month. The unemployment rate ticked down to 5.2% with participation rate staying the same at 66%. A small dent in an overall very strong jobs report is that majority of jobs, 35.7k, were part-time.

November retail sales from China came in at 8% y/y vs 7.6% y/y as expected and up from 7.2% y/y the previous month. Online shopping festive, the Double-11 (Singles’ day) propelled the reading higher than expected. Industrial production posted even more impressive numbers coming in at 6.2% y/y for vs 5% y/y as expected and up from 4.2% y/y the previous month. Electronic equipment and steel production were the largest contributors. The readings show positive effects of fiscal stimulus mainly directed into infrastructure projects.

NZD

ANZ business confidence continued its rise toward the positive territory and came in at -13.2 vs -26.4 the previous month. The activity outlook missed the expectations by bit coming in at 17.2 but it showed a great improvement from 12.9 the previous month. Global dairy trade came in at -5.1% for the largest decline of the year and second consecutive auction of falling prices.

Q3 GDP figures came in at 0.7% q/q vs 0.5% q/q as expected thus levying the year on year figure to 2.3% from 2.1% the previous quarter. A very solid beat gives more confidence to the RBNZ that they are steering the economy in the right direction and that further rate cuts are not necessary at the moment. Trade balance in November showed a decrease in deficit to -NZD753m vs -NZD1039m the previous month. Exports rose while the imports fell on a month indicating healthy foreign demand but weakening domestic demand.

CAD

Headline CPI jumped from 1.9% y/y to 2.2% y/y on the back of rising energy prices. Common and trim CPI came in as expected at 1.9% y/y to 2.2% y/y respectively while median CPI came in at 2.4% y/y vs 2.2% y/y as expected making it the highest reading in the decade. With inflation hovering little above 2%, a dream for many developed economies, BOC can relax and stand pat.

Retail sales in October posted a worst month in almost a year coming in at -1.2% m/m vs 0.5% m/m as expected. Sales were lower in 8 out of 11 subsectors. Motor vehicles, building materials and electronic and appliances were the biggest drag with electronic and appliances stores falling an amazing 17.2% y/y. Sales at gasoline stations and clothing and accessory stores were the only positives in the weak reading. CAD has lost around 40 pips across the markets on the report.

This week we will have monthly GDP data.

Important news for CAD:

Monday:

  • GDP

JPY

Preliminary manufacturing PMI in December came in at 48.8 vs 48.9 the previous month marking its eighth consecutive month in contraction. Services PMI came in at 50.6 vs 50.3 the previous month thus making composite PMI stay at 49.8. Trade balance data for November came in at -JPY82.1bn vs -JPY355.bn as expected. Exports were down 7.9% y/y vs 8.9% y/y as expected for a year of consecutive falling exports while imports plunged to -15.7% y/y vs -12.8% y/y as expected. Exports to US showed the biggest decline from the previous year coming in at -12.9% y/y. National CPI came in at 0.5% y/y as expected up from 0.2% y/y the previous month while CPI ex food and energy came in at 0.8% y/y vs 0.7% y/y as expected.

BOJ left the short-term interest rate at -0.1% as widely expected. They reiterated their stance that rates will stay at present or lower levels for prolonged periods of time, as long as needed. They see economy moderately expanding as a trend and it will likely continue to do so. Assessment of industrial production has been cut due to natural disasters that hit Japan.

This week we will have inflation data for the Tokyo area, consumption and employment data as well as preliminary November industrial production data.

Important news for JPY:

Friday:

  • CPI
  • Retail Sales
  • Industrial Production
  • Unemployment Rate
  • BOJ Summary of Opinions

CHF

SNB Chief Jordan reiterated his stance that there is no need for further rate cuts at the moment but if the need arises SNB is prepared to act. He also added that tightening of monetary policy would lead to strong appreciation of CHF which would in turn hurt the economy. Trade balance data in November came in at CHF3.92bn vs CHF3.54bn the previous month. Exports are still falling but they were better than previous month while imports improved showing the improvement in domestic demand.

You can follow all economic events on the Economic Calendar page on our Website. MT4 server time is set to GMT+3 and if you need assistance converting MT4 server time to your local time you can use some of the online time converters such as WorldTimeBuddy.

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 MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.

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