Key Fundamental Factors This Week (12/7-12/12)

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Key Fundamental Factors This Week (12/7-12/12)

Last week, the RBA, BoC, BoE and ECB gave monetary policy statements. The RBA reiterated concerns of an overvalued AUD. Poor GDP data then put more pressure on the Aussie. The BoC statement had a hawkish tone, but the poor employment data on Friday took away loonie’s strength. The BoE did not provide anything new on forward guidance and the pound wavered. Finally the ECB delayed QE but intends to continue expanding its balance sheet – call it QE-lite. The euro was pressured. Finally, US NFP eclipsed expectations giving the USD another boost by week’s end. Meanwhile, the Japanese yen continued to slide across the board from last month’s additional stimulus measures.

This week will be light relative to the last one. Let’s see what’s in store for us in terms of fundamental factors.

Tuesday (12/9)
AUS NAB Business Confidence (November)
Previous: 4
NAB Business Confidence
(click to enlarge; source: forexfactory.com)
The NAB business confidence reading has been falling 3 straight months since July’s print of 10. If business confidence continues to drop, the Australian economy might need a pick up from a rate cut from the RBA.

UK Manufacturing Production m/m (October)
Forecast: 0.2%
Previous: 0.4%

UK’s economy is not in shambles, but has been stalling its recovery. Manufacturing growth has been subdued, and is expected to remain so. We will need a few months of above 0.5% reading among other good economic data to get the BoE thinking rate hike again.

Wednesday (12/10)

RBNZ Monetary Policy Decision
Forecast: hold official cash rate at 3.50%
Previous: held official cash rate at 3.50%
rbnz
(click to enlarge; source: forexfactory.com)
The RBNZ is in a holding pattern. It is concerned with the high NZD, and low inflation and will be on a “unspecified period of assessment”. Data has not shifted, so don’t expect much from this week’s RBNZ decision. The NZD has been wavering, but has a bearish bias. So with nothing new, the NZD should remain pressured, albeit choppy.

There will be a Press Conference, and RBNZ Gov. Wheeler is also expected to speak at the start of the 12/11 session before the Finance and Expenditure Select Committee in Wellington.

Thursday (12/11)
AUS Employment Change (November)
Forecast: 15.2K
Previous: 24.1K
Australia’s economy is stalling. Commodity prices have been falling. Jobs data has been volatile. The expected 15.2K reading might be decent, but we might need at least 3-4 straight months of decent jobs gains before the AUD can find support. A reading that missies forecast and is below 10K however can guide the market into more AUD-selling in the second half of the week, unless it has already fallen sharply.

The unemployment rate is also expected to rise to 6.3%, which would keep AUD pressured. If it does not rise and remains at 6.2%, we still should not expect any AUD-strength outside of the intra-session reaction.

SNB Monetary Policy Assessment: Okay, so the Swiss-Gold initiative was voted down. The CHF was held back, and we did see a slight bump in EUR/CHF. However, current conditions suggests EUR/CHF might revisit that 1.20 low again, and the market wants to know if the SNB will continue being aggressive in defending that floor. Some reassurance can give the EUR/CHF a slight boost. Any tone that suggests the floor is more costly to defend will likely give the market more confidence to buy the CHF and push the EUR/CHF against the 1.20 floor. In terms of the key interest rate, the SNB is expected to hold it between 0.00% and 0.25%.
eurchf 12/6 4h chart
(click to enlarge; eurchf 4h chart 12/6)

US Retail Sales m/m (Nov.)
Forecast: 0.3%
Previous: 0.3%
Core Retail Sales m/m (Nov.)
Forecast: 0.1%
Previous: 0.3%
Retail sales data has been a bit underwhelming, but it has not been negative. A negative reading might hamper the USD’s current strength. A reading above 0.3% could give the USD additional strength unless it has rallied sharply ahead of Thursday.

Jobless Claims
Forecast: 299K
Previous: 297K

Friday (12/12)

US PPI m/m (Nov.)
Forecast: -0.1%
Previous: 0.2%
Core PPI m/m
Forecast: 0.1%
Previous: 0.4%

Prelim UM Consumer Sentiment
Forecast: 89.6
Previous: 88.8
umich sentiment dec
(click to enlarge; source: forexfactory.com)

Consumer sentiment in the US has been rising sharply back to levels not seen since the early part of the financial crisis. This bodes well for outlooks for holiday spending heading into the new year. The reading is again expected to rise, and if it does or comes in above 90.00, we might see another pick up in the USD unless it has already shot up by Friday. A decline in the reading might keep USD from gaining further, but only in the very short-term the overall trend is still positive for consumer sentiment.

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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.