In the shortened week ahead of us preliminary PMI data from EU and UK as well as Fed’s preferred inflation measure PCE will be the highlights. Due to the Thanksgiving holiday markets in the US will be closed so liquidity will be lower. We advise you to exercise caution in trading.

USD 

Retail sales in October missed expectations all around coming in at 0.3% m/m vs 0.5% m/m. Control group came in at 0.1% m/m vs 0.5% m/m. September report was revised down thus adding the salt to the wound of US consumer. No prospect of fiscal stimulus combined with expiring unemployment benefits lead to tightening in consumption. Nonstore retailers, online (primarily Amazon) were the biggest contributors while clothing, sporting goods and book stores were the biggest drag. Retail sales account for around 40% of total consumption which in turn makes almost 70% of GDP. Industrial production on the other hand met expectations by coming in at 1.1% m/m. 

Covid vaccine developed by Massachusetts based company Moderna showed a 94.5% efficacy in phase 3 study. None among the participants included in the study developed sever coronavirus symptoms. Vaccine can be stable for 30 days at refrigerator temperature thus giving it an advantage with transportation over Pfizer vaccine that needs to be stored at much lower temperatures. 

This week we will have second estimate of Q3 GDP, durable goods orders and Fed’s preferred inflation measure PCE. 

Important news for USD: 

Wednesday:

GDP

Durable Goods Orders

PCE

Personal Spending 

EUR 

Final inflation numbers for October came unchanged from preliminary reading. That is -0.3% y/y for headline inflation and 0.2% y/y for core inflation. ECB president Lagarde stated that key challenge will now be how to bridge the gap that virus created until vaccination is well on the way. She added that Euro area activity has lost momentum in Q4 and that virus is hitting services particularly hard. Her expectations are for inflation to stay in the negative territory until early months of 2021. EURUSD had 2 pushes toward the 1.19 level during the week but both were unsuccessful and brought the pair closer to the 1.18 level. 

This week we will have preliminary November PMI data. 

Important news for EUR: 

Monday:

Markit Manufacturing PMI (EU, Germany, France)

Markit Services PMI (EU, Germany, France)

Markit Composite PMI (EU, Germany, France) 

GBP 

Inflation in October showed a positive development with headline coming in at 0.7% y/y vs 0.5% y/y in September and core coming in at 1.5% y/y vs 1.3% y/y the previous month. Clothing and food were the biggest contributors while recreation, culture and transport groups were the biggest drag. This is a very welcoming surprise for BOE indicating stabilisation in prices as we enter Q4. Retail sales posted a rise of 1.2% m/m vs -0.3% m/m as expected with 5.8% y/y vs 4.1% y/y as expected. Retail sales ex fuel came in at 1.3% m/m vs flat as expected and rose 7.8% y/y vs 5.9% y/y as expected. Non-store retail was the biggest contributor as it rose by 6.4% while sales from household goods grew by 3.2%. Early Christmas discounts caused people to spend funds and thus keep the consumption growing in terms of volume for the sixth straight month. 

This week we will have preliminary November PMI data. Brexit negotiations were going strong throughout the week. Agreement has been characterized as being “very close” but we expect that talks will continue into the December. 

Important news for GBP: 

Monday:

Markit Manufacturing PMI

Markit Services PMI

Markit Composite PMI 

AUD 

RBA meeting minutes showed bank’s readiness to take more action if needed. Their policy is primarily focused on bond buying with further rate cuts being dismissed. Negative rates are seen as extraordinarily unlikely. Board members do not see rate hikes for at least 3 years and until inflation is sustainably within 2-3% range. Near-term outlook has improved a bit but it is still highly dependent on coronavirus developments. 

October employment report blew away expectations influenced by the lifting of the lockdown restrictions in the state of Victoria. Employment change came in at 178.8k vs -27.5k while the participation rate jumped almost a full percentage point to 65.8% from 64.9% in September. The jump in participation rate is particularly encouraging signalling that people have faith in the economy and think it will not be difficult to find a job. On the other hand, the rise may be due to the difficulty for households to make ends meet. We will have to wait for more data in the coming months to make a conclusion on that. The unemployment rate ticked up to 7% but better than 7.1% as expected while underemployment rate plunged to 1% from 10.9% the previous month. Of 178.8k newly employed 97k are full-time employed. 

Industrial production in China for the month of October was unchanged from September coming in at 6.9% y/y vs 6.7% y/y as expected. Retail sales improved to 4.3% y/y from 3.3% y/y in September but at a slower pace than expected (5% y/y). Domestic demand is continually improving this year as more and more China citizens spend their income in the country. 

NZD 

GDT price index came in at 1.8% for the first rise after four consecutive drops in auction. NZDUSD had a particularly strong week, surpassing highs from 2019 and coming to highs from 2018. There is little on the way for its rise toward the 0.70 level. 

CAD 

Inflation in October, similarly as in UK, surprised to the upside by coming in at 0.7% y/y vs 0.4% y/y as expected. Main contributor were food prices with vegetable prices rising 9.5% y/y. Median core and trimmed core measures were unchanged at 1.9% y/y and 1.8% y/y respectively while common core inflation ticked up to 1.6% y/y from 1.5% y/y in September. Retail sales for September showed an increase of 1.1% m/m thus continuing the streak of five consecutive increases. Retail sales ex auto came in at 1% m/m vs flat as expected. Sales have risen in 9 out of 11 sub sectors. Sales at food and beverage stores were the main contributor followed by vehicle sales. Preliminary data for October suggests that retail sales will come in flat at the start of Q4. 

JPY 

Preliminary Q3 GDP saw Japan post a first positive quarterly reading in four quarters. The reading came in at 5% q/q and 21.4% annualised. Private consumption came in at 4.7% q/q while business investment stayed in negative with -3.4% q/q but improved from -4.5% q/q in Q2. Net exports were positive contributor to GDP with exports rising 7% q/q while imports plunging -9.8% q/q. Final industrial production in September came in at 3.9% m/m for the fourth consecutive month of increase. The biggest contributor was the auto sector. 

October national inflation plunged below zero coming in at -0.4% y/y, the weakest inflation reading four years. Now that sales tax hike from last October has dropped from calculation we can expect negative readings to dominate inflation. Ex fresh food category came in at -0.7% y/y, the weakest reading in nine years, while ex fresh food, energy came in at -0.2% y/y. Preliminary November PMI data showed a decline in all three categories. Manufacturing came in at 48.3 vs 48.7 in October, thus breaking the streak of five consecutive monthly rising figures. Services were 46.7 vs 47.7 which pulled composite down to 47 from 48 the previous month. Covid cases are rising in Japan which lead to slowdown in business activity. 

This week we will have inflation data for Tokyo area. 

Important news for JPY: 

Friday:

CPI 

CHF 

SNB total sight deposits for the week ending November 13 came in at CHF707.9bn vs CHF707.6bn the previous week. This is a negligible rise as vaccine-induced optimism brought risk on mode in the markets which consequently lead to the weaker Swissy.

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