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Macro Events & News


FX News Today

ECB’s Mersch: No indication yet of economic pessimism after Paris. The Executive Board member said in a speech in Frankfurt that “we should shy away from drawing premature conclusions about whether the terror attacks will have any economic impact”, adding that “we have no indication of any economic pessimism as a result of the Paris attacks, let alone weaker hard data”. He warned that “doom-and-gloom talk is not warranted at this stage”. Clearly, with the attacks less than a week away, we don’t have any data yet that fully reflects the impact of the events and Mersch is right, it is too early to draw conclusions, even if markets seemed to stabilise relatively quickly. The fact that Bund futures dropped on the comments highlights though just how sensitive markets are to central bank remarks ahead of the December council meeting.

Asian stock markets are narrowly mixed, with Chinese equities under pressure for a second day, after President Xi Jinping said the economy is facing “considerable downward pressure”. Japanese markets struggled to make headway as the Yen advanced. GBP is under pressure and the EUR is little changed against USD. Oil prices meanwhile are slightly higher.

US NAHB home builder sentiment index fell 3 points to 62 in November, from an upwardly revised 65 in October (was 64). It’s the first decline since May, but it’s from a post-recession high, with the 65 level the best since 2005. The current single family sales index dipped to 67 from 70. The future sales index dropped to 70 from 75. But the index of prospective buyers traffic rose to 48 from 47. Homebuilders continue to cite low inventories as problematic, while the stronger labor market and expanding economy are beneficial.

US industrial production slid 0.2% in October. Capacity fell to 77.5%. Those missed expectations. The 0.2% September decline in production was not revised, though August was nudged up to 0.1% from -0.1% previously. September capacity utilization was revised to 77.7% from 77.5%. Manufacturing improved last month, rising 0.4% after declines in June, August, and September. Motor vehicle/parts production picked up, rising 0.7%. Excluding vehicles/parts, manufacturing was up 0.4%. Machinery production increased 0.3%. Computer, electronics production was up 0.1%. Utilities slumped 2.5%, however, with Mining down 1.5%.

The 0.2% October U.S. CPI headline and core price gains both beat estimates, with little in the way of rounding errors from respective gains of 0.200% and 0.202%. We saw the expected small 0.3% energy price rise with a 0.2% food price gain, but medical care prices surged 0.8% alongside a firm 0.4% tobacco price rise.

Main Macro Events Today

US Housing Starts: October housing starts are out today and should reveal a 2.2% decline to a 1,180k (median 1,160k) headline from 1,206k in September.

US Building Permits: We expect permits to rise to 1,150k from 1,105k and completitions to edge up to 1,030k from 1,028k in September.

FOMC Minutes: markets focus on the Fed minutes to find out clues on whether the Fed is still likely to raise rates in December and what might be the rate hike path in 2016.

MACRO EVENTS & NEWS


FX News Today

BoJ’s Kuroda: Concern about balance sheet won’t stop any more easing; with BoJ’s Kuroda adding that he doesn’t see problems in the financial system from continuing easing. At the same time Kuroda said there is the possibility that the current low rate of CPI may affect wage growth, and that the BoJ will be watching the 2016 wage talks with great interest. Speaking at the briefing following the policy meeting where the BoJ left rates unchanged, he said there is no need to change the view that price expectations are rising over the longer term. We expect the BoJ to add further stimulus in the future.

Germany’s Schaeuble would prefer higher interest rates. Not that that the comments from Germany’s Finance Minister will impress Draghi much, who seems to be heading for another cut in the deposit rate in December, even though he admitted that the low interest rate environment is very challenging for banks and insurers.

FOMC minutes: most participants thought liftoff conditions could be met by December, and hence wanted the statement to show a December hike could be appropriate. Indeed, that was the message read by the markets. The minutes also showed most officials also thought global risks had diminished. Officials also mostly agreed that the process of removing accommodation would be gradual. This is all consistent with subsequent Fedspeak since the October 27, 28 meeting. But there was nothing definitive in the minutes that the FOMC will pull the trigger in 5 weeks’ time.

US housing starts undershot estimates with an 11.0% October drop after small downward Q3 revisions, leaving a weaker than expected report despite a 4.1% rise in permits. Starts were hit by a big drop for multi-family units with a concentration of weakness in the South and West.

Main Macro Events Today

ECM Monetary Policy Meeting Accounts are revealed today and are studied carefully for further information and details on the expected easing by the central bank.

US Initial Jobless Claims: Claims for the week of November 14th are out today and should reveal a headline improvement to 267k (median 270k) after holding at 276k for the prior two weeks. The holiday season is typically a volatile time for claims and we expect November to set a slightly higher average of 266k for the month from 263k in October and 269k in September.

US Leading Indicators: The October Leading Indicators report is expected to reveal a 0.5% (median 0.4%) headline following a -0.2% headline in September and two months of flat readings before that. Most component data has been stronger in October and the improvements in the stock market should help lift the headline. For the whole story read our preview.

US Philadelphia Fed Index: The November Philly Fed should reveal a headline improvement to 0.0 (median -0.5) from -4.5 in October and -6.0 in September. The already released Empire State Index for the month improved to -10.7 from -11.4 in October. We expect producer sentiment to remain steady in November with the ISM-adjusted average of all measures holding at 50 from September.

TODAY’S CURRENCY MOVERS


The USD is lower across the board against other G7 currencies and emerging-world currencies.

The AUD outperformed against the USD, although off from intra-day highs. AUDUSD recorded a 15-day high at 0.7176.

The EURUSD fell to new 7-month lows of 1.0617 in Wednesday trade, as the FOMC minutes didn’t really clear up whether or not December rate lift off will occur.


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THE ECONOMIC WEEK AHEAD


Main Macro Events This Week

United States: The US Thanksgiving holiday on Thursday will see activity condensed into the first three days of the week. While the data calendar is highlighted with several important releases, including revised GDP, personal income, consumption, durable orders, housing stats, and consumer confidence, none are crucial enough to materially alter expectations for a Fed rate liftoff. October existing home sales (today) are expected to fall 1.8% to a 5.45 mln unit rate, unwinding some of the 4.7% rebound to 5.550 mln in September following the 5.0% drop to 5.300 mln in August. Q3 GDP (Tuesday) is expected to be revised higher to a 2.1% clip in the second release, from the disappointing 1.5% pace seen in the Advance report. However that is still considerably slower than Q2′s 3.9% rate. Global growth remains a major uncertainty, and especially in Asia. Consumer confidence for November (Tuesday) is seen rising to 98.5 after falling 5 points to 97.6 in October. Personal income and consumption figures for October (Wednesday) should help fine tune Q4 GDP forecast too. We’re forecasting gains of 0.4% for each and the strength from the employment report suggests upside risks. New home sales (Wednesday) are forecast bouncing 2.6% to a 480k pace in October after diving 11.5% in September to 468k. The housing sector remains choppy and generally disappointing. October durable goods orders (Wednesday) should edge up 0.5%, hardly correcting from the cumulative 4.2% decline from August and September, though weakness was mostly led by transportation.Canada: Canada’s economic calendar is somewhat thin this week (Friday), with the industrial product price index (IPPI) the only top tier report. We expect October IPPI to fall 0.5% (m/m, nsa) after the 0.3% decline in September as lower gasoline prices, a firm loonie and weaker commodity prices weigh on industrial prices. The establishment employment survey (Thursday) will provide earnings and employment figures for September. The results are fairly dated, with the timely labour force survey showing a 44.4k surge in October jobs and a dip in the unemployment rate to 7.0% from 7.1%. Nevertheless, the employment figures from the establishment survey are of interest, as is the earnings figure. We expect average weekly earnings to rise 0.2% m/m in September after the 0.7% drop in August. Corporate profits for Q3 (Thursday) are also due out from Statistics Canada. The Bank of Canada’s Deputy Governor Lynn Patterson (Tuesday) conducts a presentation at the University of Regina Regina, SK. The appearance, which is part of the Bank’s regional outreach program, is the final scheduled event before the Bank of Canada’s interest rate announcement on December 2. We expect no change to the current 0.50% policy rate or to the growth and inflation outlook presented in October.

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Crude Oil, Weekly

San Francisco Fed president Williams: said over the weekend that there is a “strong case” for a December rate hike. This sparked a dollar rally and some commodity volatility this morning. Today the Washington Post said that Saudi Arabia’s government is willing to cooperate with other producers to maintain stable prices. Therefore it’s not surprising that Nymex crude has had a mixed trading day today. Crude oil had a gap opening higher (we’ve been talking about Crude being at support!) in start of the futures trading. Then oil slid lower before bouncing higher again. Commodity currencies underperformed, with USDCAD whipsawing up and down with the oil market.

In the weekly picture crude oil has been forming a vast bullish wedge formation. This price action is taking place near multi-year low that took place in 2009. Current price action is taking place at lower Bollinger Bands and near a 37.75 support from August this year. Stochastics are oversold and the last week’s bar was a narrow range candle with open and closing prices near each other. Such candles signal that supply and demand are in a relative balance. Nearest resistance level is at 42.58 while the nearest support level is at 37.75.


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MACRO EVENTS & NEWS


FX News Today

EURUSD is slightly firmer today, after printing a new seven month low of 1.0592 yesterday. The market will now focus on the up- coming data releases out of Europe, while the U.S. has economic data to be released later today.

Commodity prices largely stabilized, with oil prices picked up in overnight trade. The oil market has been choppy after Saudi Arabia said it was ready to work with other OPEC members to stabilize the market.

German Q3 GDP was confirmed at 0.3% q/q, as expected. The breakdown, which was released for the first time, was pretty much as expected with strong domestic demand helping to compensate for a negative contribution from net exports. Consumption is holding up the economy, but also boosting import growth, although the sharp rise in government consumption of 1.3% q/q was a bit of a surprise. The data confirms pronounced investment weakness over the summer, with machinery and equipment investment down -0.8% q/q and construction investment down -0.3% q/q. Not really a picture of balanced growth, even if for once this recovery is not export led, but consumption led.

German Nov Ifo, the stronger than expected PMI readings for Germany yesterday coupled with the improvement in the ZEW and the rise in Eurozone consumer confidence all back our forecasts for a slight rise in the German Ifo Business Climate index to 108.3 (med 108.1), versus 108.2 in October. The improved numbers, as well as vocal resistance against additional QE measures make it unlikely that the central bank will expand its asset purchase program next week, but in our view won’t prevent another cut in the deposit rate, especially as even some of the hawks seem to agree that the zero lower bound has moved since the ECB first introduced negative rates.

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MACRO EVENTS & NEWS


FX News Today

The U.S. calendar is busy today ahead of the U.S. Thanksgiving holiday tomorrow. Weekly jobless claims are a day early due to Thursday’s holiday, and are expected to rise to 285k from 271k.

European calendar quiet today, with Italian orders, retail sales, U.K. BBA lending.

Crude Oil has made two week highs of $43.40, as geopolitics are seen as the market mover following Turkey’s downing of a Russian military jet. Also providing support to price is the slightly softer dollar, also a rationale for traders to close short positions ahead of the U.S. Thanksgiving break.

U.S. reports yesterday revealed an expected Q3 GDP growth boost to 2.1% from 1.5%. Personal income revisions for both Q2 and Q3 saw a sharp raise in the savings rate, as will be reinforced in today’s monthly income report. The higher savings rate could be seen as evidence of greater household caution, though it also leaves room for a stronger consumption path into 2016.

The Fed discount rate minutes showed 9 District banks voted to hike the rate at its October 26 meeting. That’s one more than at the prior meeting on September 15, as the Boston Fed joined the ranks of those voting for a 25 bp increase in the primary credit rate to 1.0%. The number of District banks voting for an increase has been on the rise all year; in January 9 banks had voted to maintain a steady rate. Directors generally noted positive economic conditions, and those arguing for a tightening saw improving conditions in the labor market which should help boost inflation. This adds to the speculation that the FOMC will vote to lift rates at its December 15th, 16th policy meeting.

The U.K. CBI survey showed a much lower than expected reported sales reading for November, which dropped to 7 from 19 in the previous month. At the same time BoE members sounded dovish, with Chief Economist Haldane saying in his annual report that the balance of risks to growth and inflation outlooks is skewed materially to the downside, more so than reflected in the November inflation report. BoE’s Carney warned that the low interest rate environment is likely to remain for some time to come and BoE’s Forbes said the bank probably won’t have to implement further easing, and that the next rate move is probably more likely to be a hike.

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EURUSD AT 7 MONTH LOW ON ECB EASING SPECULATION


EURUSD, Daily (Updated)

EURUSD touched fresh 7-month lows of 1.0565, before rallying back over 1.0600, with pre-holiday short covering in play. The EUR, though, is still a bearish market, and with the inevitable interest differential widening becoming more apparent, the USD will continue to grind higher against the EUR over time, until we see a shift in the ECB policy. The next EURUSD downside target (S2) in at 1.0520, representing the April low. Continued downward pressure on the EUR is also supported by speculation of further ECB easing as early as next week’s ECB meeting, following a Reuters report saying central bankers are discussing two tiered charges on banks’ deposits and further bond buying.

MACRO NEWS & EVENTS


FX News Today

The U.S. markets are closed today, and the U.S., calendar is empty until next week.

Speculation of further easing from the ECB next week should keep pressure on the EUR, the EUR is down against Yen and USD. The European calendar today focuses on Eurozone M3 numbers.

Stock markets continue to recover, as gains in commodity producers and carmakers drive European stocks up.

Base metal prices are higher today, in the wake of a Bloomberg report highlighting that China may investigate “malicious” short selling of iron ore at local metal exchanges. Copper prices had been trading at six-year lows earlier in the week. Oil prices are showing a decline currently, reversing some of rally seen over the previous three days.

BoE governor Carney, said that the low interest rate environment is likely to remain for some time. The GBPUSD now trades below 1.5100, and near the lowest point seen in the last 17 days.

Main Macro Events Today

• EUR M3 Money Supply: Eurozone M3 money supply growth accelerated to 5.3% y/y in October, from 4.9% y/y in the previous month. Expectations had been for a steady annual rate, so the data were higher than expected. Loan growth meanwhile accelerated with household loans rising 1.2%, vs 1.1% in the previous month, and business loans up 0.6%, versus 0.1% in September. Strong data.

MACRO NEWS & EVENTS


FX News Today

U.S. calendar empty today, bond and stock markets will close early.

FX markets are mostly quite over the last 24 hours , with the dollar up slightly versus the EUR and GBP, and 0.1% down on the yen.

The Shanghai Composite closed 5.5% lower its worst daily decline since August. Other markets in the Asia region fared better, though most were down. The catalyst behind the sell-off in China was news that a number of brokerages are being investigated for alleged violation of securities regulations.

Data out of Japan today were mixed, and didn’t have a big impact on markets. Headline CPI 0.3% y/y in October, but the core figure was -0.1%, and household spending dove 2.4% last month, adding to a 0.4% decline in September. Japanese unemployment fell to a 20-year low of 3.1% in October, down from 3.4%, but this was down to a shrinking labour force. The most-recent survey by Reuters found nearly all respondents expecting the BoJ to expand monetary policy at its January meeting, and today’s data shouldn’t change this picture much.

NYMEX crude has drifted lower, in line with broader commodity retreat. A 961k bbl rise in crude stocks. Analyst had been expecting a 1.0 mln bbl increase. Meanwhile, gasoline supplies, seen up 0.5 mln bbls actually rose 2.5 mln bbls, while distillate stocks were up 1.0 mln bbls, versus expectations for a 0.5 mln bbl fall. Refinery usage rose to 92.0% from 90.3%.

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DOVISH BOE SPEAK COULD BREAK A KEY GBPUSD SUPPORT


GBPUSD, Daily

The GBP has underperformed this week after BoE governor Carney said that the low interest rate environment is likely to remain for some time, while his colleague Haldane said that inflation risks were “skewed materially to the downside.” This Dovish BoE speak is seen as a driver for the GBP weakness , as it suggest that the BoE will wait till after the U.S. Fed and ECB rate moves to take effect before making any move. Technically, the GBP has further downside potential towards the 1.4960′s with room for a deeper mover lower near the 1.4890’s-60.

The downside move could be interrupted provided the key 1.5025 support holds that could support a potential price bounce for a lower top below 1.5335. The current strategy calls for selling into any signs of strength for an initial 1.4960 target, with stops near 1.5335.

ECONOMIC WEEK AHEAD


Main Macro Events This Week

• United States: The U.S economic calendar is heavy at the start of the new month, with several important reports due this week, NFP for November employment numbers (Friday). An increase of 200k is forecast, with a steady 5.0% unemployment rate. Those should be more than strong enough to support expectations for rate liftoff. Other market moving data includes the ADP number (Wednesday), expected to show private payrolls rising 190k. ISMs are due, with the manufacturing index (Tuesday) expected to edge up to 50.5 from 50.1. The services index (Thursday) is projected to slip to 57.5 from 59.1, though still reflecting solid growth in the sector. Fed Chair Yellen speaks on monetary policy (Wednesday, Thursday), Yellen will also address the Economic Club of Washington (Wednesday), and then she testifies before the JEC (Thursday). Her speech should reiterate that a rate hike is likely appropriate this year.

• Canada: The BoC’s policy announcement (Wednesday) highlights a busy week for Canadian data. Analysts expect no change to the current 0.50% policy setting, alongside a repeat of the bank’s constructive view on the growth and inflation outlook. The economic data calendar has November employment (Friday), expected to fall 10.0k after the 44.4k surge in October. The unemployment rate is seen at 7.0%, matching the 7.0% in October. Real GDP (Tuesday) is seen rebounding to a 2.3% growth pace in Q3 (q/q, saar) after contracting 0.5% in Q2. But September GDP (Tuesday) is seen flat following the 0.1% gain in August. The trade deficit (Friday) is anticipated to improve to a -C$1.5 bln in October from the -C$1.7 bln shortfall in September. Productivity (Friday) should rise 0.2% in Q3 (q/q, sa) after the 0.6% decline in Q2 as rising hours are outpaced by the expected retu rn to GDP growth. The current account deficit (Monday) is projected to narrow to -C$14.5 bln in Q3 from -C$17.4 bln in Q2. The Ivey PMI (Friday) is expected to improve to a seasonally adjusted 54.0 in November from 53.1 in October.

• Europe: The immediate focus is on the ECB meeting (Thursday), with markets looking to Draghi again. There remains the likely scenario for a cut in the deposit rate. Data releases this week , German HICP (Monday) , the overall Eurozone CPI reading (Wednesday) is seen at 0.3% y/y (median same), up from 0.1% y/y. Headline rates, as well as core inflation, have been trending higher, though that hasn’t stopped Draghi and Constancio from reviving talk about deflation risks in the Eurozone.

• UK: This week’s calendar features the BoE lending data for October (Monday). The Markit PMI surveys will be released too, starting with the manufacturing sector survey (Tuesday), followed by construction PMI (Wednesday) and services PMI (Friday).

• Japan: Preliminary October industrial production (Monday)is seen falling 0.5% m/m, versus the 1.1% gains seen in September. October retail sales (Monday) are expected up 0.5% y/y from the prior 1.7% gain for large retailers, and down 0.5% from -0.2% overall. October housing starts (Monday) are seen up 2.5% y/y from 2.6%, while October construction orders (Monday) are also due. The Q3 MoF capex survey (Tuesday) is forecast to rise 1.0% y/y from the previous 5.6% rise. November Markit/JMMA PMI (Wednesday) is penciled in at 52.8 from 52.4. November consumer confidence (Friday) likely advanced to 41.6 from 41.5.

• China: PMI reports (Tuesday) are on tap. The official CFLP November manufacturing PMI is expected to fall to 49.5 from 49.8. The Caixin/Markit PMI outcome is seen at 48.2 from 48.3, while the services PMI is forecast to rise to 53.0 from 52.0.

• Australia: The AUD calendar is highlighted by the RBA’s meeting (Tuesday). Analyst expect no change to the current 2.00% rate setting, but economic data has been disappointing of late so the risk is skewed towards another 25 basis point rate cut. The economic data calendar is busy. GDP (Wednesday) is expected to improve to a 0.5% growth rate in Q3 (q/q, sa) following the 0.2% gain in Q2. The current account (Tuesday) is seen narrowing to a -C$17.0 bln deficit from -C$19.0 bln in Q2. Building approvals (Tuesday) are expected to fall 2.0% in October following the 2.2% gain in September. The trade deficit (Thursday) is seen worsening to -A$2.8 bln in October from -A$2.3 bln in September. Retail sales (Friday) are expected to raise 0.3% m/m in October following the 0.4% gain in September. The TD-MI inflation gauge is expected to raise 0.1% m/m in November after the flat reading in October.

MACRO EVENTS & NEWS


FX News Today

EUR traders are positioning ahead of the ECB meeting on Thursday, with markets preparing for the Eurozone central bank to cut its deposit rate and hoping for an expansion of the QE program.

Today’s European calendar , on tap U.K. manufacturing PMI, German unemployment. The final EMU manufacturing PMI, likely to be confirmed at 52.8 (median same). German jobless numbers are seen down -7K (median -6K), which will leave the adjusted jobless rate unchanged at 6.4%. The calendar also has the U.K. Manufacturing PMI, which is seen falling back to 53.5 (med 53.6) from 55.5 in October. Switzerland releases Q3 GDP numbers as well as October retail sales.

The U.S. calendar heats up today, to be released out of the U.S. we have, Manufacturing ISM, Construction Spending, and Auto Sales, although traders are mostly waiting for Friday’s NFP report, as well as Fed Chair Yellen’s comments tomorrow. Fed-speak resumes today with remarks from dove Evans of the Chicago Fed, who will be addressing current economic conditions and monetary policy from 12:45 ET. Fed Governor Brainard will next tackle the “Lower Neutral Rate and its Implications for Monetary Policy” from Stanford in California after the close from 20 ET, while VC Fisher speaks at a Financial Stability conference.

RBA left cash rate unchanged at 2.00%; RBI also held policy steady as was widely expected. The board was constructive regarding the economic outlook, saying that “prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate.” Of course, they maintained scope to ease if needed, saying the “outlook for inflation may afford scope for further easing of policy.” As for the currency, they noted the AUD is “adjusting to significant declines in key commodity prices.”

Asian stock markets are mostly higher, despite disappointing data out of China, with markets in Japan, Hong Kong and Australia rebounding after strong capex data out of Japan and as bargain hunters move in. U.K. and U.S. stock futures are also higher.

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AUD OUTPERFORMING THE USD, MEASURED MOVE IN PLAY


AUDUSD, Daily

The AUDUSD moves higher in the wake of the RBA, holding steady rates at 2%, as widely anticipated. The economic outlook according to the board at the RBA , are that the “prospects for an improvement in economic conditions had firmed.” As for the currency, they noted the AUD is “adjusting to significant declines in key commodity prices.” Technically, a measure move from the September lows (0.6940) to October highs (0.7380) looks to be in play, since price continues to extend the advance from the November retrenchment lows (0.7015). If price can hold above the FE 61.8% (daily) near 0.7290, this could open up the possibility for a re test of the October highs (0.7360) with 0.7450 as the extended target.


MACRO EVENTS & NEWS


FX News Today

The USD traded mostly softer in Monday trade losing some ground following the November ISM missed expectations, while the U.S. stock market rallied in response to the weakness in the ISM index. The November figure dropped to 48.6, below the 50 break-even for the first time since 2012, and is the lowest since 2009. The November U.S. ADP employment survey will be the key event today, while the main market focus will be the scheduled speech from Fed Chairwomen Janet Yellen. However, the Fed Chairwomen will not commit to any specific timing on any interest rate hike, especially ahead of Friday’s jobs report and the FOMC meeting.

Notable U.S. Fed speak from Chicago Fed voter Evans reiterated that he favors later liftoff than his peers and that a gradual pace of hikes is required given downside inflation risks. He thinks it may be appropriate for rates to be below 1% by the end of 2016. He is not optimistic on a quick pick up in inflation as he judges core inflation will be just under 2% by the end of 2018. This is probably the most likely scenario.

The European calendar has prelim Eurozone Nov HCIP, and PPI, UK construction PMI, the main focus will be on the preliminary Eurozone HICP reading for November. The German and Spanish inflation ticked higher, and if confirmed, a 0.3% y/y reading in the overall Eurozone number would still be higher than the 0.2% y/y reported for October. This would then confirm the uptrend that has been visible in the last couple of months. EU core inflation also has been trending higher.

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GBPUSD TO DROP ON WEAKENING MACRO DATA, DESCENDING TRIANGLE SUPPORTS THE MOVE


GBPUSD, Daily

Weakening U.K. macro data, dovish guidance from BoE governor Carney, and a series of consecutive lower tops and bottoms on the GBPUSD price is creating a technical bearish descending triangle that supports my view that the pair will trend lower towards the price objections 1.4960 (Target 1) and 1.4890 (Target 2). Given that this week is filled with scheduled market moving events i.e U.S. Fed Speak, Friday NFP, which should create wide price swings, supports my view to look for an opportunity of strength to sell into around the 1.5170 – 1.5225 zone.

MACRO EVENTS & NEWS


FX News Today.

The U.S. ADP employment data came in better than expected, we also saw an uptick in Q3 productivity and unit labor costs; the data gave some support for the USD on Wednesday. The U.S. Fed chair Yellen appeared to put in place the foundations for a December rate within the next two weeks hike during her speech yesterday. For the time being, the market will remain “data-dependent” with all eyes now on the jobs report due out tomorrow. Unless the jobs report is a complete disappointment, markets will continue to adjust for a rate hike.

European markets will focus on today’s ECB decision, analyst projections call for a cut in the deposit rate of at least 20 basis points, maybe even larger if there are sizeable exemptions and a widening of the pool of eligible assets under the QE program.

The EUR is under selling pressure against the USD ahead of the ECB’s policy decision; EURUSD short sellers may have been profiting-taking yesterday, however, the downtrend continues today after a short lived rebound attempt yesterday after the pair hit a new multi-month low.

Main Macro Events Today

• EUR Final EMU Services PMI: revised down to 54.2 from 54.6 reported previously but still up from 54.1 in October. The composite reading was also revised down to 54.2, but remained up from 53.9 in the previous month. So economic expansion still accelerated in November and all major Eurozone countries are reporting growth, although November readings were mixed, with the Spanish PMI coming in higher than expected at 56.7, up from 55.9 in the previous month. The Italian reading meanwhile was unchanged at 53.4, while the final French number was revised down to 51.0 from 51.3 and the German reading was confirmed at 55.6.

• EUR ECB Interest Rate Decision: a cut in the -0.2% deposit rate plus a tweak in the QE program is likely. The widening of pool of assets under QE would give Draghi more room to manoeuvre in the future and add weight to his promise to do everything needed to bring inflation back towards the 2% mark.

• GBP Services PMI: The U.K. has the Services PMI for November, which we expect to bounce back to 55.5 (median 55.0) from the 54.9 reading in October.

• USD Unemployment Claims: U.S. initial jobless claims are expected to be 269k (median 271k) in the week-ended November 28. Continuing claims are expected to rise to 2,244k for the week-ended November 21.

• USD ISM Non-Manufacturing PMI: The U.S. ISM-NMI is expected to fall to 57.5 from 59.1 in October. The July spike to 60.3 set a new post-recession high.

• USD Fed’s Yellen Testifies.

EURUSD SURGES 300+ PIPS ON ECB RATE CUT AND EXTENDED QE PROGRAM


EURUSD, Daily

The ECB cut the deposit rate by 10 basis points to -0.3% from -0.2%, while leaving the key refinance rate unchanged. European stock markets have sold off in the wake of Draghi’s disappointing measures since the central bank’s cut in the deposit rate was less than anticipated and the widening of QE purchases not as aggressive as the markets would anticipate.

At the time of this writing, the EUR trades above the 1.08 level, up nearly 280 pips for the session; most of the market was caught by surprise as market sentiment had been poised for a downside move. However, the week is far from over as tomorrow’s all important and widely anticipated U.S. Non-Farm payroll report could offer traders even more surprises.

Technically, the EURUSD could possibly return towards resistance area 1.1090. For the moment, traders may seek for higher prices before entering any new short positions.


MACRO EVENTS & NEWS


FX News Today

Yesterday was a historic trading day for EUR traders in the wake of the ECB’s and Mario Draghi’s surprise move that disappointed the EUR short sellers in the market, after the ECB cut the deposit rate by just 10 basis points when the market had priced in at least a 20 basis point cut. High EURUSD price action after the disappointing announcement likely blew up short sellers as the pair surged higher by 450+ pips on the day.

EURUSD short sellers will be further tested today as today’s U.S. jobs report could offer some more surprises. A stronger NFP number could flip some of EURUSD recent gains, however on the other side of the trade, if we see a big NFP drop off, we could quickly see a EURUSD pop the late October’s levels near 1. 1100.

The EUR gets a bit of further support today as the German manufacturing orders at the start of the session came in much higher than anticipated at 1.8% m/m and September data were revised sharply higher.

Fed Chair Yellen finished her JEC testimony on policy without adding anything new. She repeated several times that the economy is growing and the labor market is near full employment. Liftoff went on to say, also doesn’t mean the FOMC is embarking on a pre-determined course, and added, the trajectory will be gradual. So it looks as though it’s all systems go for a small hike.

Asian stock markets are down across the board, following on from heavy losses in the U.S. and especially the Eurozone, as Draghi’s package of easing measures fell short of expectations.

The weaker USD drove up oil prices though short covering ahead of today’s OPEC meeting has been viewed as the culprit. A lack of agreement on production cuts from the Vienna meeting, will see the global supply glut picture come back to center stage and further oil price losses may be expected.

Main Macro Events Today

• EUR German Manufacturing Orders: Surged 1.8% m/m, a much stronger rebound than expected and with the September number revised up sharply to -0.7% m/m from -1.7% m/m, the numbers tie in with the better than expected confidence readings this month. Still, this was the first improvement since June, and the three months trend rate still dropped to -2.9% from -2.7% in the three months to September. The German recovery may for once be driven by consumption, rather than exports and manufacturing, but still, these are weak numbers that suggest a slowdown in activity at the start of next year.

• German construction PMI: Jumped to 52.5 from 51.8 in the previous month. More signs that the construction sector is picking up as low interest rates fuel demand for property investment and the refugee crisis will mean additional demand for housing. Something then to counterbalance the weak manufacturing sector, which is facing a drop in demand.

• USD NFP: November nonfarm payrolls are expected to increase by 200k, with a 190k private payroll gain. Forecast risk: upward, as lean claims readings should provide some tail wind. Market risk: downward, as substantial weakness could put a December rate hike on hold. The unemployment rate is expected to remain steady from 5.0%. The workweek is expected to remain at 34.5 from September. Hourly earnings are expected to grow 0.1% which would leave a 2.2% y/y rise. Hours-worked should be up 0.1% for the month following a 0.3% increase last month.

• USD Trade Deficit: The October trade deficit is expected to hold steady from -$40.8 bln in September. Exports in October are expected to fall 1.6% while imports show a 1.3% decrease on the month. Forecast risk: downward, if October service trade captures some of the goods-trade weakness. Market risk: downward, as weaker than expected data would push back rate hike assumptions. The trade deficit has failed to narrow significantly in 2015 despite a sharp price-led drop in petroleum imports, thanks to weakening foreign demand and a strong dollar.

• CAD Unemployment: Employment is expected to fall 10.0k in November after the 44.4k surge in October. Forecast Risk: Canada’s job surge in October was driven by a 32.0k surge in public administration payrolls that was largely due to temporary work associated with the federal election. A pull-back seems in the cards as those temporary workers are let go with the conclusion of the election. But education payrolls could provide a boost, having declined 3.6k in October on top of the 51.3k plunge in September that was the largest on record. Hence, the risk is mixed given the divergent risks associated with public admin and education.

• CAD IVEY PMI: Canada’s Ivey PMI is expected to rise to 54.0 in November from 53.1 in October on a seasonally adjusted basis.

MACRO EVENTS & NEWS


FX News Today

Asian stock markets are sharply down and Australian bonds posted the sharpest gains since July, as China’s exports fell for a fifth month and a sharper than expected decline in foreign exchange reserves fuelled fears about the health of the Chinese economy. Oil prices are little changed and close to the lowest level since 2009. U.S. stock futures are also lower, but U.K. stock futures are managing slight gains. Eurozone markets stabilized yesterday, with yields coming off and the DAX bouncing back from the sharp losses seen in the wake of last week’s ECB meeting. Released overnight, U.K. BRC retail sales came in much weaker than expected and should support bond futures. The calendar also has U.K. production and the final reading of Eurozone Q3 GDP.

China’s Exports fell 6.8% y/y in November, while the analysts expected for 5.0% contraction. Trade surplus narrowed to $54.1 bln in November,contrary to expectations for an increase relative to the $61.6 bln surplus in October. Exports fell 6.8% y/y in November after the 6.9% drop in October. Imports contracted at a 8.7% y/y clip in November following the 18.8% pull-back in October. The report confirms the ongoing challenges for China’s trade outlook. China’s equities are lower, with the Shanghai Composite down 1.5%. The Nikkei is down 1.0%, while the Hang Seng is off 1.7%, as Asia’s stock markets key off the declines in the US

Japan’s real GDP was revised to a 1.0% gain in Q3 (q/q, saar) from the previous 0.8% drop. An upward revision was expected, but to a very modest gain. Hence, Japan’s economy did not fall into recession after all, with contraction confined to the revised 0.5% drop in Q2 (was -0.7%). Capital spending was revised to a 0.6% gain in Q3 from the initial 1.3% drop. The improvement in Q3 growth, notably the gain in capital spending, trims the chance that the BoJ will implement further stimulus early next year. The yen is little changed, with USD-JPY holding in the 123.3 region.

US consumer credit rose $16.0 bln in Octoberafter surging $28.6 bln in September (revised from $28.9 bln), with the August increase nudged down to $14.6 bln from $16.0 bln. Non-revolving credit continued to lead the strength, rising $15.8 bln versus the $21.9 bln jump previously (revised from $22.2 bln). Revolving credit was up $0.2 bln versus September’s $6.7 bln gain.

Main Macro Events Today

EU GDP: The final reading of Eurozone Q3 GDP is out today and should confirm growth rates of 0.3% q/q and 1.6% y/y, with the breakdown expected to show that growth remains driven by consumption and domestic demand.

Canada Housing Permits: are released today and are seen dipping 1.0% in October after the 6.7% tumble in September and 3.6% pull-back in August.

BoC Governor: The Bank Of Canada governor Poloz will be speaking today on “The Evolution of Unconventional Monetary Policy. The most recent policy announcement remained cautiously optimistic regarding the expected recovery in growth and acceleration in underlying inflation through 2017.