Key Fundamental Factors this Week (11/10-11/14)

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Key Fundamental Factors this Week (11/10-11/14)

This last week was a heavy one in terms of key fundamental factors. We had several central bank decisions (RBA, BoE, ECB), along with many key employment data, most important of which was Friday’s US NFP.

The overall theme at the end of the week remains USD-strength. The RBA did not have any change in tone, the BoE seems to be pushing its rate hike back because of the European slowdown, and the ECB looks like it is gearing up for QE because of the slowdown. Let’s see what’s in store for us this week in terms of fundamental releases.

Tuesday 11/11

graeme wheeler
RBNZ Governor Graeme Wheeler 
(December 5, 2012 – Source: Hagen Hopkins/Getty Images AsiaPac)

RBNZ Financial Stability Report: (previous), RBNZ Gov. Wheeler to hold a Press Conference on the Financial Stability Report
This report is important because the RBNZ has stopped raising interest rates  since the previous report. It is likely to hold for a long period and has not given any forward guidance on when it will raise rates next. The financial stability report might give shape to some projections. Some themes to look for:
1) China’s economic outlook and impact on NZ
2) The strength of NZD (Wheeler was calling for a few months of decline, and so far it has been going the way he was hoping. He will probably still call for a lower kiwi)
3) Commodity Prices: NZD is a commodity dollar – slightly correlated with commodity prices, specifically dairy. If the bank expects further decline in commodity prices, it is not considering a rate hike any time soon.

Wednesday 11/12

UK Claimant Count Change (Oct)
Forecast: -24.9K
Previous: -18.6K
Average Earnings Index 3m/y (Oct.)
Forecast: 0.9%
Previous 0.7%
Unemployment Rate (Oct.)
Forecast: 5.9%
Previous: 6.0%
BoE Inflation Report/Gov. Carney to Hold Press Conference on Inflation Report
mark carney
(source: flickr)

We are going to get a slew of UK data/event risk on Wednesday. From the jobs data ,the average earnings index is becoming a key data set because the BoE is looking for wage growth before it can raise rates. If earnings grow faster than expected ie. 1.0% over the past 3 months, we might see a bump for GBP. The inflation report will also be key. Inflation has returned from above target and threatens to now fall below target. Let’s see if the report shows this concern, because if it does, it can keep pressure on the GBP.

Thursday 11/14

US Jobless Claims (weekly)
Forecast: 282K
Previous Week: 278K
JOLTS Jobs Openings (September)
Forecast: 4.75M
Previous: 4.84M
11/13 JOLTS job opening
(click to enlarge; source: forexfactory.com)

Jobless claims data has become a reminder of the US job market recovery. However, it is only one piece of the larger picture. Just because fewer people are claiming unemployment benefits, it does not mean there are more jobs, and more people working. The JOLTS jobs openings data adds a piece to the picture, and it has also been improving as you can see on the historic chart above. Now we need real wage growth before the FOMC will seriously consider raising rates.

Friday 11/14

German Prelim GDP q/q (Q3)
Forecast: 0.1%
Previous: -0.2%
german GDP q3 2014
(click to enlarge; source: forexfactory.com)
Will Germany be able to stave off a recession, or will there be 2 consecutive quarters of contraction? Forecasts call for a small 0.1% expansion in Q3. Now, if the reading disappoints, even if it stays flat instead of negative, we can expect pressure on the EUR. A recession in Germany is bad news for the Eurozone. A couple quarters of growth closer to 0.5% might help the EUR find a bottom because at the moment, it is in a persistent decline.

Prelim UM Consumer Sentiment (Nov.)
Forecast: 87.3
Previous: 86.9
um consumer sentiment
(click to enlarge; source: forexfactory.com)
US consumers appear to be gaining optimism heading into the holiday season. Forecast calls for another rise to highs not seen since 2007, Sentiment is therefore near the levels before the financial crisis.

The fundamental docket seems to be light this week compared to last week. Focus on central bank implications, and Germany’s Q3 GDP for clues on EUR’s outlook.

Previous Post by Author: EUR/GBP Building a Price Bottom Above 0.78

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.