Overview of Major market movers for 46th week of 2015

Author Anil Panchal Category Fundamental Analysis 10 Nov 2015 Updated at 12:25 CET
Brighter US job details, published last Friday, indicated that the NFP rose to five months high and Unemployment rate tested May 2008 lows during the month of October. Upbeat labor market numbers echoed recent FOMC comments that the December rate hike is still on table and fueled the US Dollar Index (I.USDX) towards highest levels in more than six months, needless to mention about the weekly gain. The Euro remained weaker, with no major releases, as market players kept favoring the USD strength and the European Commission downgraded euro-area growth and inflation outlook for 2016 while the GBP witnessed bad week as Bank of England (BoE) cut down inflation and growth forecast in its Quarterly Inflation Report (QIR) and the BoE Governor spelled dovish words for the monetary policy outlook. Moreover, the Australian Dollar gained considerably against majority of its counterparts, except the USD, as the Reserve bank of Australia’s (RBA) refrained from cutting down the interest rate cut and the Japanese Yen became a victim of improved risk sentiment from the market players, damaging the JPY safe-haven demand.

The 46th week started with continued flow of pessimistic Chinese details wherein the exports form dragon nation slipped 6.9%, consecutive fourth monthly decline, while imports fell 18.8%. Moreover, the Chinese Inflation numbers, published on early Tuesday, mentioned that the CPI keep marking below forecast numbers and signaled that the deflationary pressure onto the world’s second largest economy still persists.

Looking forward, financial stability report from the RBNZ, labor market details of Australia and UK, EU Flash GDP and US Retail Sales are likely to keep maintaining the Forex volatility during the present week while Chinese Industrial Production, together with US PPI and Preliminary reading of UoM Consumer Sentiment, are the rest of economics that would offer busy trading schedule to the global financial market players. Let’s discuss each one of them in detail.


USD Up-move Depends Upon Friday’s Consumer-Centric Details

Even if the recent labor market numbers renewed speculations that the Federal Reserve will increase their benchmark interest-rate for the first time since 2006 in December, upcoming US data-points have higher importance than previously as there would be fewer numbers ahead of December monetary policy meeting that could determine the US Dollar fate. US economic calendar is almost empty during the week, except on Friday when monthly details of Retail Sales, PPI and the Preliminary reading of UoM Consumer Sentiment will help forecast the USD moves.

The Consumer-centric details indicate that the Retail Sales grew marginally, with only 0.1% gain, during the month of October, and the Consumer Sentiment marked a revised down 90.00 number while the Core Retail Sales contracted with -0.3% mark. Moreover, the PPI plunged negative with -0.5% print. Consensus relating to current statistics favors a three month high Retail Sales and Consumer Sentiment to 0.3% growth rate and 91.3 print respectively while the PPI and Core Retail Sales may reverse their prior declines with 0.2% and 0.4% respective gains. Moreover, weekly jobless claims, scheduled for Thursday, can stop its four week’s up-move with a 270K mark against its 276K printed during last week.

With the optimism surrounding December rate hike getting fueled by recent labor market details, coupled with hawkish tone of some of the FOMC members, during their public appearances, upbeat prints of consumer centric details can validate the recent USD up-move.
UK Job Details To Control Further GBP Moves

Following pessimistic outcome of BoE’s QIR, UK labor market numbers, mainly the Unemployment Rate, Claimant Count Change and Average Earnings, scheduled for Wednesday release, becomes more important as it could portray the strength of UK job world and will justify the recent decline of the GBP.

UK Unemployment Rate recently marked record lows of 5.4%; however, the Claimant Counts have gone up off-late and causing a worry for the UK policy makers to determine the strength of the job market. Further, the Average Earnings have also increased lately and signaled rising income and an expected improvement in UK inflation, favoring the UK MPC members to shift from their pessimistic announcement to the optimistic words in future. Considering the latest figures, Unemployment rate dipped to 5.4% lows while the Claimant Count Change rose to three months high to 4.6K and the Average earnings rose by 3.0%. Forecast relating to the current releases indicate an increase in earnings, to 3.2%, the highest in four months, and a cut in Claimant Count to 1.6K while the Unemployment rate is expected to remain static at 5.4%.

As the UK labor market details have been flashing upbeat reports off-late, another set of optimistic numbers can erase recent declines of the GBP; though, weaker marks by these numbers favor chances of further monetary easing, rather than the previously expected interest rate hike, and can provide noticeable damages to the UK currency.

EUR Traders Would Observe EU Flash GDP To Forecast EUR Trend

Although recent comments from ECB President were dovish, favoring additional monetary policy easing to counter weaker inflation, Q3 2015 GDP growth numbers from EU and Germany, scheduled for release on Friday, become important to foresee near-term EUR strength as strong economic growth may not need extra loose monetary policy and can help the regional currency recover its recent losses. Looking at the numbers, the initial forecast for Germany’s Q3 2015 GDP signals that the economic growth has been slowed down with 0.3% growth rate from 0.4% prior while the EU GDP growth is likely to remain static near the upwardly revised 0.4% mark.

Given the GDP numbers mark an improvement in economic growth, the ECB may refrain from announcing QE extension during its December meeting, indicating stronger Euro; however, set of disappointing GDP numbers would echo the ECB President’s dovish statement relating to the need of further monetary easing and can provide considerable downside to the Euro.

Economic Details From China, Australia and New-Zealand Are The Rest To Fuel Forex Market

In addition to the economic details from US, UK and EU, Industrial production from China, Financial Stability Report by the Reserve Bank of New-Zealand and the job details from Australian, coupled with Australian Westpac Consumer Sentiment are some other details that could continue offering liquid forex market during the rest of this week.

Recently published Chinese details concerning Trade Balance and Inflation statistics kept flashing red signals for the world’s largest economy, indicating need of further monetary boost to avoid another round of global deflation crisis triggered by world’s largest industrial production. However, monthly Industrial Production y/y, scheduled for Wednesday, becomes important to conclude the previous argument. The gauge of industrial production is expected to rise at a bit faster rate of 5.8% compared to its 5.7% prior. Off-late the Chinese manufacturing numbers have been disappointing and downbeat industrial production would favor chances of further monetary easing by the Chinese central bank, providing more downside to commodities and the commodity currencies, namely AUD, NZD and CAD.

Key job indicators from Australia, the Employment Change and Unemployment Rate, are scheduled to be announced on Thursday and indicates improvement from their previous releases. The Employment Change is expected to bounce from its -5.1K mark with +14.8K number while the Unemployment Rate may remain stagnant at 6.2% level. Moreover, Westpac Consumer Sentiment, up for Wednesday release, recently reversed it -5.2% declines with +4.2% gain. Even if the Australian labor market details print optimistic numbers and the Consumer Sentiment also improves, the broader weakness of the Aussie, mainly due to the Chinese pessimism, can remain intact while set of downbeat numbers would magnify the AUD downside.

Last but not the least, bi-annual Financial Stability Report by the Reserve Bank of New-Zealand (RBNZ) is scheduled to be published on late Tuesday and becomes important for the NZD traders as it provide insights of inflation, growth, and other economic conditions from their perspective and will be followed by the press conference of the RBNZ Governor. Considering recent declines in dairy prices, together with weaker job numbers and Chinese pessimism, a downbeat outlook by the RBNZ is more likely, favoring further NZD declines; however, central bank’s tendency to avoid macro weakness may provide profit booking pullback to the New-Zealand Dollar (NZD).
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