The US dollar and the yen continued retreating for another week, as optimism towards a resolution of the fiscal cliff took center stage. A very busy week awaits us, with key top tier US indicators leading up to the all-important Non-Farm payrolls, 5 rate decisions and many other important events in the first week of the last month. Here are the main market movers. Fasten your seat-belts.
US housing remains the highlight of the economy, as US Pending Home Sales Leaped 5.2%, even as new home sales disappointed. Headline GDP growth seems strong in Q3, but there are 4 worrying signs regarding future growth. We will now get fresh PMIs and jobs data. These figures are also critical for the next Fed decision, as are fiscal cliff discussions. Every politician has a chance to move the markets. In Europe, a non-complete deal was struck for Greece. The bond buyback program is already beginning to unravel.. This is a critical pillar of the agreement. Will the deal survive in its current form?
- US ISM Manufacturing PMI: Monday, 15:00. U.S. Manufacturing PMI index edged up unexpectedly to 51.7 in October, following 51.5 in September, indicating the manufacturing sector is in a growth trend. A similar figure of 51.5 is predicted now.
- Australian rate decision: Tuesday, 3:30. The Reserve Bank of Australia (RBA) maintained its official cash rate at 3.25%, following a previous rate cut in October, contrary to predictions of another 0.25% rate cut. Reserve Bank Governor Glenn Stevens claimed the effects of previous rate cuts had not yet been fully realized. A rate cut of 0.25% is expected now, but doesn’t have a full consensus. This uncertainty will rock AUD/USD on any outcome.
- Canadian rate decision: Tuesday, 14:00. The Bank of Canada kept its target for the overnight rate at 1.0%. The Canadian economy is in a moderate growth trend as seen in the recent GDP report, and is expected to pick up and return to full capacity by the end of 2013. Housing activity, as well as exports, are expected to expand. No change is forecasted now.
- Australia GDP: Wednesday, 0:30. Australia’s economy grew at a slower pace in the second quarter, rising 0.6% following a 1.4% expansion in the first quarter. Economists expected a slightly higher growth rate of 0.8%. The weak figures reflect the sluggishness in the housing market and the depreciation in the Aussie.0.6%. The same expansion rate is predicted this time.
- US ADP Non-Farm Employment Change: Wednesday, 13:15. US companies increased hiring in October, adding 158,000 jobs, significantly better than predicted and well beyond the 88,000 increase in the previous month. These strong figures are further evidence of a pickup in the economy. Another strong rise of 141,000 is expected. Note that ADP now uses a better formula for calculating the number, making it more reliable for the NFP.
- US ISM Non-Manufacturing PMI: Wednesday, 15:00. The non-manufacturing index dropped moderately to 54.2 in October, from 55.1 in September. However it still signals expansion. Six out of the 10 sub-components, were above 50, but New Orders declined from 57.7 to 54.8. A further decline to 53.8 is forecasted this time. The employment component is important to follow, due to vast size of the services sector in the US economy.
- NZ rate decision: Wednesday, 20:00. The RBNZ’s Official Cash Rate was maintained at 2.5% for the 22nd time. The last rate decision was conducted by the newly appointed Governor Graeme Wheeler. Economic sentiment improved but global weakness and the strong kiwi continues to weigh on NZ’s economy. No change is expected.
- Australia employment data: Thursday, 0:30. The Australian economy added 10,700 jobs in October, following a 15,500 addition in September, much better than the 200 increase expected by analysts. Unemployment rate remained stable at 5.4%missing predictions for a 5.5% unemployment rate. Full-time employment rose by 18,700 to 8,130,100 in September, while part-time employment was down 8,000 to 3,393,100. Australian economy is expected to add 200 jobs while unemployment is predicted to reach 5.5%
- UK rate decision: Thursday, 12:00. No change in rates is expected, but an expansion of the QE program cannot be ruled out after one member already voted for it in November. Recent economic data hasn’t been too favorable and it seems that Q3 was the (Olympic) exception rather than the norm. The pound seems to enjoy future monetary prospects: a more hawkish policy under Carney. For December’s meeting, no change in policy will likely result in no big change in GBP/USD, while more QE could send the pound initially lower, but without a long lasting effect. QE has a much more significant effect in the US than the UK. The decision might be somewhat overshadowed by the Chancellor’s Autumn Statement..
- Eurozone rate decision: Thursday, 12:45. There are many reasons for cutting the rates in the euro-zone: a slower rise in prices, the danger of Germany entering a recession and a potential credit crunch. Nevertheless, Draghi does not seem to be in rush to act just yet. There is a better chance that a 0.25% rate cut will wait for January. A rate cut now would be a small surprise, weighing on the euro. No cut would set the focus on the press conference, where Draghi could make thicker hints about a move in January. In any case, no positive words are expected, and it’s hard to see the euro rising in response to the rate decision.
- US Unemployment Claims: Thursday, 13:30. This indicator returned to normal after recent disruptions wrought by superstorm Sandy. Claims for unemployment benefits decreased by 23,000 to 393,000, in line with predictions. A drop to 381K is expected now – something that would already not be taken with a grain of salt by markets.
- Canadian employment data: Friday:13:30. Canada’s recent boost in job creation nearly halted in October, adding a meager 1,800 jobs, following an elevated 52,100 surge in September. Meanwhile, unemployment rate remained at 7.4%. The total number of jobs created during the past year amount to 229,000, all full-time. The labor market is expected to gain 4,700 new jobs with a stable unemployment rate of 7.4%.
- US Non-Farm Employment Change: Friday, 13:30. The last non-farm Payrolls before the US presidential election came out better than expected with 171,000 job addition in October, following a 148,000 increase in September. The only decline occurred in Government employment, down 13,000 jobs for October, but lower government employment can, in some ways, still be considered a positive. US economy is expected to gain 91,000 jobs this time. Note that this data may be somewhat distorted by “Sandy”.
- US Unemployment Rate: Friday, 13:30. Despite the impressive 171,000 job addition in October, unemployment rate increased to 7.9% from 7.8% in September, due to an increase in the number of job seekers. While the rise in the unemployment rate was expected, the increase in jobs beat the expectations, indicating an ongoing improvement in the US economy. No change is expected.
- US UoM Consumer Sentiment: Friday, 14:55. The last preliminary reading from the Thomson Reuters/University of Michigan Consumer Sentiment Index was revised up to 84.9 from 82.7, following 82.6 in the previous month. Amid renewed optimism about employment prospects and the outlook for the overall economy. The reading was higher than the 82.6 predicted by analysts. A decline to 82.1 is expected now.
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