US and UK inflation prints, other key data in focus
Next week’s market movers
- • In the US, the Fed will release the minutes from its November policy meeting. Given the absence of major signals in the statement, investors may look at the minutes of the Committee’s view regarding the recent soft patch in inflation.
- • The ECB will also release the minutes from its latest gathering, where it announced a reduction in the pace of its future QE purchases. The market focus may be primarily on the conversation of whether or not to set a clear end-date for QE, which the Governing Council did not provide.
- • As for the RBA minutes, they may attract some attention for any further clues regarding the Bank’s exchange-rate concerns.
- • We also get key economic data from Germany, the Eurozone, the UK, the US, and New Zealand.
On Monday, the day is very quiet, with no major events or indicators on the schedule.
On Tuesday, during the Asian day, the RBA will release the minutes from its November policy gathering, where the Bank remained on hold and maintained its broadly neutral stance on policy. Even though the Bank highlighted some sources of concern in the economy, such as the recent softness in consumer spending, it also noted that other sectors are performing relatively well and in particular the labor market. Importantly, policymakers retained their concerns regarding the strength of AUD, noting that the exchange rate is weighing on the outlook for growth and employment. We think that market participants, at least in the FX market, are likely to scan the minutes for any further clues on that front.
On Wednesday, the FOMC will release the minutes of its November meeting, where the Committee kept interest rates unchanged and provided no major signals about the future direction of policy. Indeed, the statement accompanying the decision contained very few changes compared to the previous one, with most of the differences being related to the recent hurricanes. The Committee simply noted that hurricane-related disruptions and rebuilding will continue to affect economic activity in the near-term, but past experience suggests that the storms are unlikely to alter the course of the economy in the medium-term. Given the lack of concrete guidance in the statement, we expect investors to scrutinise the minutes for any hints regarding the Committee’s overall view on the economy and in particular, on the recent soft patch in inflation. Considering that a December rate hike is almost fully priced in at the moment, anything that puts that prospect in doubt could work against the dollar.
As for the economic data from the US, we get durable goods orders for October. Expectations are for a significant slowdown in both the headline and the core prints. The New orders sub-index of the ISM manufacturing PMI for the month also slid, but the slide was not large enough to support the aforementioned forecasts. As such, the risks surrounding these forecasts may be somewhat tilted to the upside.
On Thursday, during the Asian morning, we get New Zealand’s retail sales for Q3, but no forecast is available yet. Nevertheless, taking into account the New Zealand electronic card transactions indicator, we see the case for a slowdown. According to that report, spending in the retail industries fell 0.6% in July and rose a mere 0.1% in both August and September.
In the Eurozone, the ECB will release the minutes of its October policy meeting, where the Bank announced a reduction in the pace of its future QE purchases but did not provide a clear roadmap on when purchases may end completely. Even though this release is usually not a major market mover, we think it could attract extra attention this time, considering the magnitude of the decision that policymakers took back then. In particular, we expect the market to focus on the conversation regarding whether the Bank should have announced a clear end-date to QE or not. Given that some influential policymakers like Weidmann noted after the meeting that they preferred to have announced such an end-date, we will look to see whether this view was shared just by a couple of members, or whether there was more support for such action.
As for the bloc’s economic data, we get the preliminary Markit manufacturing and services PMI for November. The consensus is for the manufacturing print to have declined a little, albeit from a rather high level, while the services figure is expected to have risen. On balance, we think that these will be pleasant news for ECB policymakers, as they could signal that the bloc’s economy continues to perform at a robust pace.
From the UK, we get the 2nd estimate of GDP for Q3 and expectations are for this print to confirm the preliminary estimate and show that the economy gathered some speed during the quarter. This release will also include the updated business investment for the quarter, which is likely to attract a lot of attention as investors and the Bank of England policymakers try to gauge whether Brexit-related uncertainties have begun to influence business decisions. Overall, we stick to our guns that GBP traders are likely to keep their gaze fixed mainly on the political spectrum, and specifically the EU-UK negotiations.
In the US, markets will be closed in celebration of the Thanksgiving Day.
Finally on Friday, we get the German Ifo survey for November. The current assessment index is forecast to have declined marginally, while no forecast is available for the expectations index yet. Taking a look at the ZEW survey for the month though, we see the case for both indices to have risen. Both the current conditions and economic sentiment ZEW indices rose in November, signaling continued growth in Eurozone’s growth engine.
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