Anti-risk Sentiment Swept the Markets (Weekly Review)

Among scheduled macroeconomic events of the past week we should highlight the announcement of interest rate decisions of the Reserve Bank of Australia and the Bank of Canada, as well as release of data on the labor market and wages in the United States. In full accordance with the forecasts of financial market participants, both central banks put no changes to their monetary policies, and the accompanying statements were sufficiently “soft” not to render any support to the Australian and Canadian dollars.

Aussie was under pressure, helped by the fall of the Chinese yuan and the Shanghai Composite stock index, and the looni was under pressure due to falling oil futures, and the central banks' decision to leave interest rates unchanged only aggravated the situation. These factors will continue to influence the dynamics of Aussie and Loonie, but in the case of large-scale sales of the USD, Aussie can be adjusted upwards; the same can happen to loonie if oil futures break through the current correction highs and continue to grow.

Along with "anti-risk" sentiment that swept the markets for speculation about a possible slowdown in the US economy and geopolitical risks, the US dollar was also not in a better position, being under the pressure of the Japanese yen and the Swiss franc, which was also facilitated by sales on the stock markets. Nonfarm payrolls released on Friday disappointed the bulls and heightened confidence that the Fed could soon take a pause in monetary tightening. Nevertheless, the differential in interest rates is still a factor supporting the USD, and the bulls on the JPY should be extremely careful, but in case of a further fall in the yen indices, it will continue to enjoy some demand.

Schedule for this week:

Monday, December 10
09:30 GMT – United Kingdom. Trade Balance;
09:30 GMT - United Kingdom. GDP;
09:30 GMT - United Kingdom. Manufacturing Production;
09:30 GMT - United Kingdom. Industrial Production;
13:15 GMT – Canada. Housing Starts;
13:40 GMT - United Kingdom. NIESR Monthly Gross Domestic Product (GDP) Tracker (QoQ) (Nov).

Tuesday, December 11
United Kingdom. U. K. Parliament voting on Brexit;
00:30 GMT – Australia. House Price Index;
01:00 GMT – New Zealand. ANZ Monthly Inflation Gauge;
09:30 GMT - United Kingdom. Jobless Claims;
09:30 GMT - United Kingdom. ILO Unemployment Rate (3M) (Oct);
09:30 GMT - United Kingdom. Average Earnings Index +Bonus (3M/Y) (Oct);
09:30 GMT - United Kingdom. Average Earnings ex Bonus (3M/Y) (Oct);

10:00 GMT – Germany. ZEW Current Conditions;
10:00 GMT - Germany. ZEW Economic Sentiment;
13:30 GMT – USA. Producer Price Index (PPI);
13:55 GMT – USA. Redbook Index.

Wednesday, December 12
23:30 GMT – Australia. Westpac Consumer Sentiment Index (Dec);
02:15 GMT – PRC. Foreign Direct Investment (FDI);
10:00 GMT – Eurozone. Industrial Production;
13:30 GMT – USA. Consumer Price Index (CPI);
13:30 GMT - USA. Core Consumer Price Index (CPI);
15:00 GMT - USA. Jerome Powell Speaks.

Thursday, December 13
23:50 GMT – Japan. Foreign Investments in Japanese Stocks;
23:50 GMT – Japan. Foreign Bonds Buying;
01:00 GMT – Australia. Reserve Bank of Australia Bulletin;
07:00 GMT - Germany. Harmonised Index of Consumer Prices (HICP);
07:00 GMT - Germany. Consumer Price Index (CPI);
07:30 GMT – Switzerland. Swiss National Bank Monetary Policy Assessment;
08:00 GMT - Switzerland. Swiss National Bank Press Conference;
12:45 GMT – Eurozone. ECB Interest Rate Decision;
13:30 GMT - Eurozone. ECB Press Conference and Monetary Policy Statement;

13:30 GMT – USA. Initial Jobless Claims.

Friday, December 14
02:00 GMT – PRC. Industrial Production;
02:00 GMT – PRC. Retail Sales;
04:30 GMT – Japan. Industrial Production;
08:30 GMT - Germany. Markit Services Purchasing Managers Index (PMI);
08:30 GMT - Germany. Markit Manufacturing Purchasing Managers Index (PMI);
09:00 GMT – Eurozone. Markit Manufacturing Purchasing Managers Index (PMI);
09:00 GMT - Eurozone. Markit Composite Manufacturing Purchasing Managers Index (PMI);
13:30 GMT – USA. Retail Sales;
14:15 GMT - USA. Industrial Production;
14:15 GMT - USA. Capacity Utilization Rate;
14:45 GMT - USA. Markit Manufacturing Purchasing Managers Index (PMI).

The most important events of this week are the British Parliament’s vote on Brexit that can greatly influence the dynamics of the British pound, and the meeting of the European Central Bank. Although no surprises are expected from it, any hint of an upcoming normalization of the monetary policy may trigger a large-scale correction of the EUR.

Author: Anthony Porter, IAFT Analyst