- USD: USD buoyed by domestic data upside, personal spending and core durable goods orders in focus
- GBP: Brexit’s outcome and General Election results in focus
- JPY: JPY on the bid amid trade uncertainties, Tokyo CPI in focus
- EUR: Germany’s IFO business climate, GFK Consumer Confidence, CPI, Unemployment and Eurozone’s CPI and unemployment data in focus
- AUD & NZD: Unclear outcomes on global trade continue to be the key factors this week for both AUD and NZD despite heavy week with domestic data release
- CAD: Focus will be on upcoming GDP data release as investors would prefer to adopt a wait and see approach
USD edged higher last week as risk-off sentiment has buoyed the safe havens. U.S. Senate passed a bill on Tuesday aimed at protecting citizen’s rights in HK. Besides, Trump threatened to raise tariffs on Chinese imports further if a trade deal cannot be reached. On the data side, U.S. homebuilding rebounded in October, and permits for future home construction jumped to a more than 12-year high, suggesting the economy might have bottomed and is recovering gradually. On Friday, IHS Markit said its U.S. flash manufacturing sector purchasing managers index rose to 52.2 in November from 51.3 in October. This is the fastest rate since April.
Meanwhile, the U.S. flash services sector purchasing managers index in November rose to 51.6 from 50.6. This is the quickest expansion since July. USD could continue the rally as data prints to the upside, reviving investors’ confidence in the economy. This week we will have Chicago PMI, personal spending, and Core Durable Goods Orders. If data continue to print to the upside, USD could strengthen against most majors.
Pound was able to sustain its rally last week before closing lower at the end of the week. The Sterling’s performance was largely driven by the general election results which indicated that the Conservatives were in ample lead. Besides, assurance from Nigel Farrage that his Brexit party won’t contest the 317 seats won by the Conservatives at the last election and will go after the Labour-held seats instead, along with Prime Minister Boris Johnson claiming that all Conservative Party Candidates in the December 12 election have pledged to back his Brexit deal, opening the door to getting the agreement passed through the Parliament, helped to prop the currency higher. Looking ahead, on the data front, it is a light calendar week for the Sterling this week, with the Consumer Confidence data in focus though any impact is likely to be minimal as the focus remains on the Brexit saga.
EUR rallied against the greenback last week as trade optimism helped to prop the currency higher before paring recent gains as a report by Politico indicated that Trump administration officials are considering whether to start a new trade investigation to justify tariffs on the EU. Looking ahead, on the data front, investors will be keeping a close watch on Germany’s IFO business climate, GFK Consumer Confidence, CPI, Unemployment and Eurozone’s CPI and unemployment data which could help to prop the currency higher should they meet estimates.
JPY was buoyed by uncertainties in the U.S.-China trade talks in the past week. On Thursday, Bloomberg reported, citing unnamed sources, that China’s lead trade negotiator Liu He said at a dinner speech on Wednesday that he was cautiously optimistic about a phase-one trade agreement with the U.S. The report added that Liu told an attendee he was “confused” by the U.S. demands, while remaining confident that a phase-one agreement could be reached. Trump and Chinese President Xi Jinping were expected to meet on the sidelines of an international summit in mid-November in Chile, until it was canceled due to domestic unrest. While investors await for good news from the trade front, safe havens are still on the bid due to the uncertainties.
The AUD moved sideways over the course of last week. Given a light week with only RAB’s meeting minutes release, we know that the RBA left rates unchanged. Further, there was no fresh developments coming from the US-China trade talks. This week, we have more domestic data release. Investors should watch closely private new capital expenditure, new home sales and private sector credit. A better than expected data release for these events would show that the domestically Australia’s economy is going well and investors can expect the AUD to strengthen, barring any fresh developments on the US-China trade front.
NZD moved a lot but got nowhere last week. It made made huge sideways swings but it ended the week at the same level where it was at the start of last week. The NZD dipped lower on mixed sentiments regarding US-China trade talks. However given improving Global Dairy trade prices, the NZD was lifted up. Going forward into this week, we have a number of high impact data coming up such as the RBNZ financial stability report, trade balance, core retail sales and ANZ business confidence report. Should the data be better than expected, we can see the NZD outperform further if there are no negative sentiments from the ongoing US-China trade talks. Else, investors may see the NZD still continue to move in a sideways range.
Last week has been a heavy week for the CAD as it weakened considerably at the start of the week despite positive domestic data. This is probably due to the price of oil tanking. However, on Thursday, BoC’s Governor Poloz surprised market with his hawkish tone, pointing out that the economy is in a “good place” and that there should be no need to change monetary policy. This caused the CAD to strengthen significantly. This coming Friday would be a heavy day for the CAD as we have GDP data release. Hence we expect that investors would prefer to stay on the sidelines in anticipation of GDP data.
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