WEEKLY OUTLOOK: NOV 18 — NOV 22: RBA, FOMC and ECB Meeting Minutes, Flash PMIs, German Final GDP

This week we will be getting the meeting minutes from the three major central banks: the RBA, the ECB and the Fed. In addition to that, some preliminary manufacturing and services figures are expected from Australia, Japan, US, Germany, UK and eurozone as a whole. Also, Canada’s CPIs and Germany’s final GDP readings will be in the spotlight.

Monday will be a rather quiet day economic data wise, as we do not get any significant information from any country, which might have its strong impact on the market. There is only an ECBs financial stability review and the German Buba monthly report to watch out for. The ECB financial stability report tends to be published twice a year and shows the potential financial risks in the euro area. The German Buba (Bundesbank) report provides information on issues relating to financial and economic policies, including issues that surround the monetary policy.

On Tuesday, during the early hours of the Asian morning, New Zealand will deliver their PPI input and output numbers for Q3 on a QoQ basis. Input is believed to have increased from the previous +0.3% to +0.5%, whereas the output number is expected to have gone from +0.5% to +0.3%. RBNZ keeps an eye on those figures as well, in order to understand how producer’s and service provider’s costs have moved in the previous quarter, and how much could be passed on to the consumer in the end.

After the NZ data, the RBA will publish the meeting minutes of the previous monetary policy board meeting, which was delivered in the beginning of November. The members of the board continue express their concerns over the ongoing trade tension in the world among certain key players. The domestic economy is experiencing its ups and downs, with the manufacturing sector slowing down, but the service sector still showing resilience. The labour sector was also showing stability up until last week, when we saw unemployment rising by one tenth of a percent, going from 5.2% to 5.3% and the participation rate falling for the second month in a row. But the biggest disappointment in the Australia’s labour market was the sharp slide in the unemployment change figure, which fell below zero and is sat now at -19.0K. But despite that, overall, the Australian economy is showing stability with its growth rate at +0.5%, and the RBA expects it to pick a bit more going into 2020.

In terms of other Tuesday’s economic data, the US is set to release its building permits and housing starts figures for the month of October. The permits are believed to have declined slightly from 1.391M to 1.383M. On the other hand, the housing starts are forecasted to have increased a bit, going from 1.256M to 1.320M.

Wednesday will be a slightly more exciting day, as we will be getting a few important data sets. The day will kick off with the People’s Bank of China delivering its interest rate, or which is also known now as the Loan Prime Rate (LPR). Previously in October, the rate was set at +4.2%, but the forecast is aiming for +4.1%. The LPR was designed to replace the Bank’s benchmark lending rate, in order to help bring the borrowing costs lower, which may help businesses to battle the ongoing China-US trade tensions.

Germany is set to deliver on its MoM and YoY PPI figures, which are believed to have fallen from the already-low last month’s numbers. The MoM figure is expected to come out at negative 0.1%, where the previous reading was at a positive 0.1% number. Last time, the YoY figure was already below zero, at -0.1%, but this time it expected to continue declining towards -0.4%. If the forecasts are true, this might affect the euro slightly in the negative way, possibly forcing it to decline a bit against some of its major counterparts.

During the European morning we will get UK’s labour productivity number for Q3, for which there is now forecast available, but the previous reading was at -0.5%. We know that labour is mainly driven by higher wages, which means that an increase in productivity results in workers being incentivised by their companies to produce more over the same amount of time. These incentives might be an increased cost for the company, which could be passed on to the end consumer. This could help inflation to rise slightly.

Speaking about inflation, Canada will hit the spotlight with its inflation numbers. Currently, the expectation is for YoY core and headline numbers to have remained unchanged, at +1.9%. If so, this is still within the Bank’s inflation-control target range, between 1 and 3 percent. But +1.9% is slightly on the lower side, of where the BoC would like inflation to be. The Bank expects a temporary dip in inflation in the beginning of 2020, but overall, the forecast is that it may continue balancing around +2.0%.

A couple of hours before the US closing bell, the FOMC will release the minutes of their meeting held in the end of October. As we all know, the Fed cut its rates for the third time this year, placing them into the range between +1.50% and +1.75%. According to CME’s Fedwatch Tool, the probability of the Fed cutting again by the end of this year lies only at around 0.7%. That means that the FOMC could be done cutting rates for this year, unless there will be serious concerns surrounding economic growth. Investors will keep a close eye on the minutes, in order to seek for the Fed’s further guidance on its monetary policy.

Thursday will be an eventful day as well. The ECB will publish its account of October’s policy meeting. During that meeting, which also was the last one for Mario Draghi as the head of the ECB, the Governing Council decided to keep interest rates at previous levels. The main refinancing rate was kept at 0% and the deposit rate was at -0.5%. The Bank stated that it will keep the rates at current or lower levels, unless inflation starts picking up and gets closer to its target of below, but close to 2%. The Governing Council repeated that they are restarting the net purchases under the Asset Purchase Programme (APP), which already started on November 1st.

Before the US opening bell, we will get the Philadelphia Fed Manufacturing Index for November. The indicator measures the relative level of business conditions amongst manufacturers in the Federal reserve district. From July this year, the figure has been declining sharply, but the current expectation is for the number to beat the previous 5.6 reading and come out at around 7.0. If so, USD traders might take it in a positive way, as the data could give a slight boost for the greenback.

An hour and a half after the Philly Fed Manufacturing Index, US will deliver on its existing home sales figures for the month of October. The expectation here is for an improvement, going from 5.38M to 5.48M, with the MoM number forecasted to increase from -2.2% to +1.7%.

On Friday, during the early hours of the Asian morning, Australia will provide us with its preliminary manufacturing and services PMI figures. Currently, there are no forecasts available, but lately, the numbers have been on a gradual decline.

Japan will release the same indicators as Australia will do, but there are no forecasts are available, as well. But the main focus will be on the Japanese inflation numbers, both core and headline on YoY basis. The first one is believed to have ticked up by a tenth of a percent, going from +0.3% to +0.4%, whereas there is no forecast for the headline one. All we know is that the previous reading was at +0.2%, which is quite far from the BoJ’s Price Stability Target of +2.0%. If the reading comes out better than the expected or the previous numbers, this could prove to be a positive for the Japanese yen.

The European morning will start off with Germany sharing its final GDP figures for Q3 on a QoQ and YoY basis. The QoQ figure is believed to come out at +0.1%.

Later on, we will have ECB’s new president Christine Lagarde delivering a speech and half an hour after that, the eurozone will produce its preliminary PMI numbers for the month of November. Manufacturing, composite and services readings are believed to have improved slightly, which may also support the euro. UK will also release its preliminary manufacturing and services PMIs, where the manufacturing number is believed to have gone down from 49.6 to 49, and the services figure is forecasted to have remained slightly above 50, at 50.2.

The US will also deliver their numbers on the same sets of data, as UK and the eurozone. The US preliminary manufacturing is expected to have increased slightly, going from 51.3 to 51.5. The composite number is also believed to have risen slightly, from 50.9 to 51.5. The services figure is expected to move up from the previous 50.6 to 51.1.

But before the US comes out with its data, Canada will deliver on it retail sales number for the month of September. The core and the headline MoM readings are forecasted to have gone up from -0.2% to +0.3%, and from -0.1% to +0.2% respectively.

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Originally published at https://www.jfdbank.com on November 18, 2019.