The US Dollar moved on up around Thanksgiving in a week which saw a risk-off sentiment. What’s next? Things are becoming busier in the last week of November. with the FOMC Minutes, GDP, and two major summits. Here the highlights for the next week.
Global stock markets and oil prices fell sharply once again. The moves, though not one-sided, benefited the US Dollar and the Japanese yen. PM Theresa May seemed to have survived a challenge on her leadership but does not seem to have a majority in parliament to support her Brexit deal. She will first face European leaders in the EU Summit. The European Commission rejected Italy’s budget once again and this weighed on the euro.
EU Summit on Brexit: Sunday-Monday. The UK and the EU reached a detailed agreement on the UK’s divorce from the EU. This will likely be signed off by all countries. Uncertainty remains about the political declaration about the future relationship. The sides will be negotiating various topics such as the status of Gibraltar which has infuriated Spain. UK PM Theresa May will try to achieve some small wins in the event in order to muster more support for the deal when it goes to parliament early in December. Headlines from the EU Summit will set the tone for the opening of the new week, mostly moving the Pound but also the Euro and other currencies. Reactions from Brexiteers in Britain also matter quite a bit.
US CB Consumer Confidence: Tuesday, 15:00. The Conference Board’s consumer confidence measure has been around 18-year highs in the past few months, indicating elevated enthusiasm and implying increased consumer spending. After hitting 137.9 points in October, the score for November may be a bit lower. A score of 136.2 is on the cards.
US GDP (second release): Wednesday, 13:30. The first estimate of US growth for Q3 came out at 3.5% annualized, not as fast as Q2 but still a rapid clip of growth. Nevertheless, there were a few worrying signs such as a high level of inventory growth and a drop in exports. The second release matters not only for the change in the headline but also if we see modifications to the composition. A revision to 3.6% is forecast.
US New Home Sales: Wednesday, 15:00. Sales of new homes trigger broad economic activity around them and impact the wider economy. They stood at an annualized level of 553K in September. We will now receive the numbers for October. The housing sector showed signs of a slowdown in recent months.
US Core PCE Price Index: Thursday, 13:30. The Federal Reserve targets this specific inflation gauge, giving it its importance despite the late publication. Core CPI for October fell short of expectations and decelerated to 2.1% y/y. Core PCE stood at 2% in September and the figure for October is projected to stay unchanged despite the drop in Core CPI.
FOMC Meeting Minutes: Thursday, 19:00. The Fed decided to leave rates unchanged in November, as broadly expected. Chair Jerome Powell and his colleagues made only minor tweaks to the statement, most notably downgrading their assessment of business investment. The meeting minutes from that event will shed some light on how much the central bank is concerned about the slowdown. Moreover, it will be an opportunity to hint about a December rate hike by using a phrase along the lines of “it will be appropriate to raise interest rates soon.” Several Fed officials expressed concern about the global slowdown and some do not want to raise rates in November. We will now learn if the Fed is ready to pause.
Euro-zone inflation: Friday, 10:00. Similar to the US, the odds of a rate hike have recently dropped in the euro-zone. A fresh look at November’s preliminary inflation numbers will provide some insights into the next moves of the European Central Bank. Back in October, headline CPI rose by 2.2% while Core CPI bounced back to 1.1% after dropping below 1% beforehand. Headline inflation is expected to slide to 2.1% while core CPI is expected to remain unchanged.
Canadian GDP: Friday, 12:30. The Canadian economy grew by only 0.1% m/m in August, an unimpressive outcome. The figure for September concludes the third quarter and is of higher importance for the C$.
G-20 Summit: Friday, Saturday. Global leaders will descend on Buenos Aires over the weekend to discuss current affairs. The most important event is the bilateral meeting between US President Donald Trump and his Chinese counterpart Xi Jinping. The world’s two largest economies are still at loggerheads on trade, with the US set to raise the tariffs on some $200 billion worth of Chinese goods from 10% to 25% in January. At times, Trump sounded optimistic about reaching a deal, but negotiations have not gone too far.
