WEEKLY MARKET SNAPSHOT 11/12-15/12| Central banks come into sharp focus during the coming week as the FOMC, ECB and BoE all reveal their latest rate setting decisions
As we enter the last weeks of the trading year, three leading central banks will reveal their last 2017 decisions, on interest rates and other monetary policy issues, next week. Both European banks; the ECB and the Bank of England are forecast to keep rates on hold; the U.K. bank at 0.5% and the ECB at zero, although investors will focus on any accompanying narrative or press release, for clues as to future management in 2018.
However, the FOMC, which is a committee comprising of all the regional Federal Reserve chairs, are expected to announce a interest rate rise at the conclusion of their two day meeting on Wednesday at 19:00pm GMT next week. The current rate is 1.25% and the general consensus opinion, from the economists polled by Bloomberg and Reuters news agencies, is for a rise to 1.5%. This rise would complete the commitment made by the Fed chair and the FOMC at the start of the year; to raise interest rates three rises during the year.
Naturally focus will turn to the press conference conducted by Janet Yellen, who is now the outgoing chair of the Fed, to be replaced by Mr Jerome Powell in February of the New Year. As to whether or not this is her final FOMC speech and if she’ll deliver clues, regarding a hawkish or dovish policy, is difficult to predict, given that Mrs. Yellen may prefer to leave that to her replacement. However, should a rise occur, followed by a particularly hawkish statement suggesting further tightening of the monetary policy in 2018, then the U.S. dollar could experience a range of movement on Wednesday.
Sunday begins the week with a series of data releases from China, the most prominent of which is the amount of new loans issued in November, the forecast is for a rise, to 825b from 663b yuan.
Monday is an extremely quiet day for major economic, medium to high impact, calendar news. Japanese machine tool orders may deliver an insight into the continual manufacturing growth of the country; if the country is continually tooling up for work, then the prospect for manufacturing is enhanced. The level of deposits in the Swiss banking system will be revealed. Later in the day the USA JOLTS numbers could deliver a hint regarding the strength of other jobs data, such as the latest NFP numbers, published later in the week.
Tuesday starts with Australian data regarding: overall business conditions, house price purchases and credit card lending. The Japanese tertiary index is also published. After European markets open focus will be on the latest U.K. inflation figures, a raft of which will be revealed including: wage growth, retail price inflation etc. The CPI figure is currently at 3%, the anticipation is that this figure will be maintained. House price inflation in the U.K. is forecast to come in at close to the 5.4% delivered in September. The various ZEW surveys for Germany and the Eurozone are delivered in the morning trading session; the December expectations for Germany and the current situation for the E.Z. are the most closely monitored.
As U.S. markets open a raft of USA PPI data is revealed, the most prominent of which is the final YoY demand producer figure. The USA monthly budget figure is delivered, as with similar metrics the USA runs permanent deficits, October’s deficit was -$63.2b, little or no improvement is anticipated.
Focus returns to Australia late evening; RBA governor Lowe delivers a speech in Sydney, whilst the Westpac consumer confidence reading is published. The day closes with Japanese data on machine orders, both monthly and yearly and with both figures going negative in October an improvement will be sought, in order to demonstrate that Japan’s manufacturing sector is strong and stable.
On Wednesday focus is on European data releases during the European session; Germany’s CPI should remain at approx 1.8% YoY, whilst industrial production figures and Eurozone employment growth figures are also published. The U.K. ONS will deliver its latest jobs figures and details regarding wage growth. Unemployment in the U.K. is forecast to stay at 4.3%, with wage growth at 2.2% YoY.
As investor attention shifts to USA markets, the consumer price inflation reading is revealed amongst a raft of other inflation data, CPI is currently at 2% YoY, there is no expectation for a change. Average earnings (real) YoY are forecast to remain at 0.4% illustrating that USA workers wages have hardly budged in real terms throughout the year.
The FOMC will deliver its latest interest rate announcement on Wednesday evening, currently at 1.25%, forward guidance issued by the Fed has suggested that a rise to 1.5% is almost certain. Janet Yellen will perhaps deliver her last FOMC press conference after the decision is revealed, which may reveal how dovish or bearish the FOMC and various Fed chairs, are likely to be during the early stages of 2018.
On Thursday Australian authorities publish the latest unemployment and employment figures, the forecast is for unemployment to remain at 5.4%. Part time and participation employment rates are also published. Several Chinese figures are published, including; retail sales, which are forecast to rise to 10.3% YoY, with industrial production growth forecast to remain at 6.2% YoY.
Various Markit PMIs for Germany and the Eurozone are published on Thursday as European markets open, from the U.K. we’ll discover the latest retail sales growth figures before the BoE announces its latest base interest rate decision, with the forecast for a hold on the current 0.5% rate. The ECB also makes its rate decision on the day, with the consensus forecast for a hold of the current zero rate. Shortly after the rate decision is revealed, Mario Draghi, the ECB president, will hold a press conference in Frankfurt.
As U.S. markets open initial and continuous jobless claims for the USA will be published, as will import and export price changes and advanced retail sales numbers. The series of Markit PMIs for the USA economy will be published, business inventory metrics will conclude USA economic calendar releases for the day.
The day ends with the publication of a raft of Japanese data; the Tankan series on various manufacturing sectors, combined with the data earlier in the week concerning machine and tools orders, will help indicate the strength of Japan’s manufacturing sector.
On Friday, the trade balance surplus figures for the month of October in the Eurozone are released, before focus moves onto North America. Canada’s manufacturing sales figures are published, as are the latest existing home sales figures for the country. The USA empire manufacturing data for December is revealed, as are the industrial and manufacturing production figures. The Baker Hughes rig count figure may come under closer scrutiny given stockpiles of oil have reduced and OPEC have committed to extended protection cuts.
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