Forex Weekly Outlook Dec. 3-7 – Risk rally on the successful Trump-Xi Summit? And there’s more in store

The US Dollar ended November with mixed moves. What’s next? The first week of the last month of the year features the all-important Non-Farm Payrolls, its full buildup, and more. The open belongs to the reaction from the successful Trump-Xi summit. Here the highlights for the next week.

The EU Summit approved the Brexit deal as expected but there is growing uncertainty if the UK government can pass the deal in parliament. Signs of a compromise from Italy supported the euro. US President Trump and his Chinese counterpart Xi Jinping agreed on a trade truce for 90 days that will likely set a positive tone for the open of trade in Asia.

1. US ISM Manufacturing PMI: Monday, 15:00. ISM’s Purchasing Managers’ Index for the manufacturing sector dropped to 57.7 points in October. Nevertheless, the score points to robust growth in the small, yet significant sector. Apart from serving as a forward-looking gauge for the sector, the publication also provides a hint towards Friday’s Non-Farm Payrolls report. 57.5 is expected.
2. Australian rate decision:   Tuesday, 15:3:30. The Reserve Bank of Australia left the interest rates unchanged at 1.50% for over two years, and this decision will unlikely be different. Governor Phillip Lowe and his colleagues have hinted that the next move will more likely be to the upside, but an increase is not imminent. Comments about the improving labor market, the cooling housing one, and international trade will be of high interest. The central bankers will likely have the GDP data before them, so any reference to growth may serve as a hint.
3. Australian  GDP: Wednesday, 00:30. The Australian economy enjoyed a rapid clip of growth in Q2: 0.9% q/q. This went hand in hand with other economies’ healthy expansion rates. The land down under releases employment figures only once per quarter, making the release more impactful. It also provides insights into Chinese and global growth. A slower growth rate is likely for Q3. An increase of 0.6% q/q is projected.
4. UK Services PMI: Wednesday, 9:30. The third and last of Markit’s PMI figures are for the largest sector and tends to be a significant market mover for the pound. The score stood at 52.2 points in October, a level that represents low growth. The upcoming publication for November may be even lower given the high level of uncertainty around Brexit. 59.2 is projected. 52,5 is expected.
5. Jerome Powell talks: Wednesday, statement released at 13:15, testimony begins after 15:00. Fed Chair Powell goes to Capitol Hill and will provide a testimony about the economy and monetary policy. After his recent perceivably dovish comments, every word about interest rates will be closely watched. The central bank  is on course to increase rates later this month but the next moves are unclear. The FOMC dot-plot implies three hikes in 2019 but markets are pricing in fewer ones.
6. US ADP Non-Farm Payrolls: Wednesday, 13:15. Automated Data Processing reported an increase of 227K private sector jobs in the US in October, above the averages. The publication moves markets on its own and also shapes expectations for Friday’s NFP. It is important to note that the two reports are not always well-correlated, at least before revisions. 196K is projected.
7. Canadian rate decision: Wednesday, 15:00. The Bank of Canada raised rates to 1.75% in October and also delivered a hawkish message. The upbeat assessment of the BOC is not fully reflected in the price due to the crash of oil prices. Governor  Stephen Poloz and his colleagues are set to leave rates unchanged at this event, which does not consist of new forecasts nor a press conference. However, the Ottawa-based institution will likely maintain the hawkish bias and leave the door wide open to an increase in the Overnight Rate in January. Growth, employment, and the signing of the USMCA accord that replaces NAFTA, all support the BOC’s hawkish view.
8. US ISM Non-Manufacturing PMI: Wednesday, 15:00. ISM’s report for the services sector remained on the high ground in October, at 60.3 points, pointing to robust growth. November may have seen a slide given growing uncertainty. Also here, the number also works as a hint, the last hint, ahead of the NFP. 59.2 is on the cards.
9. US Non-Farm Payrolls: Friday, 13:30. Dubbed the “king of indicators”, America’s jobs report provides significant input ahead of the last Fed decision of the year. The report for October was quite upbeat, with a gain of 250K positions and year over year wages finally topping 3%, reaching 3.1%. Month over month, salaries were up 0.2%. The jobless rate stood at a low of 3.7%. The report for November may show more moderate job increases. The report for November is projected to show an increase of 200K positions and a rise of 0.3% in monthly wages. The unemployment rate is expected to remain unchanged at 3.7%.
10. Canadian jobs report Friday, 13:30. Canada’s job market is doing OK. Back in October, the unemployment rate fell to 5.8% and 11.2K positions were gained. The months before October saw high volatility. Apart from the headline numbers, it is important to note the composition of job changes: full-time and part-time, as well as the change in wages which has a growing impact on the loonie.

*All times are GMT

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Further reading:

• EUR/USD forecast – for everything related to the euro.
• GBP/USD forecast – Pound/dollar analysis
• USD/JPY forecast – the outlook for dollar/yen
• AUD/USD forecast – projections for the Aussie dollar.
• USD/CADc forecast – Canadian dollar predictions

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