The US dollar had a good week ahead of the FED, which is naturally the key event coming up. A rate decision also awaits us in the UK. Inflation data in both countries and employment figures in various place also fill the agenda. These are the highlights for this week. Here is an outlook on the major market-movers coming our way.
Last week continued to shine on US data reaffirming the Fed’s plan to raise rates this week. U.S. services sector activity jumped 2.4 points to 57.2 in November, the highest reading since October 2015. Production edged up 4 percentage points and employment soared 5.1% points to a 13-month high. The services sector which accounts for more than two-thirds of U.S. economic activity is expected to boost GDP growth to 3.5% annual rate. Among the services industries reporting growth in November were retail trade, construction, finance and insurance, information and wholesale trade. Let’s start:
- UK inflation data: Tuesday, 9:30. The UK inflation rate posted a smaller than expected gain in October, rising 0.9% from 1% in September. The reading was lower than the 1.1% increase forecasted by analysts. Prices of raw materials advanced in October as well as prices of finished goods. However, clothing and university tuition fees rose more slowly than in 2015. Nevertheless, economists expect inflation will rise amid the depreciation of the Sterling since the Brexit vote. CPI is expected to gain 1.1% in November.
- UK employment data: Wednesday, 9:30. UK employment data was mixed in October with an eleven year low of 4.8% in the unemployment rate from 4.9% in September. Meanwhile, the number of people claiming unemployment-related benefits increased 9,800 in October, the largest increase for five months after an upwardly revised increase of 5,600 for September. The data suggest the UK labor market is losing momentum. The number of new unemployment claims is expected to register 6,200 in November.
- US Retail sales: Wednesday, 13:30. U.S. retail sales edged up more than expected in October, rising 0.8% amid stronger automobile sales, higher demand for building materials and a range of other goods. September’s reading was also revised up to show a 1% gain, reaffirming the strength of the economy and supporting the Fed’s intentions to raise rates this month. Furthermore, core sales, excluding automobiles, jumped 0.8 percent last month after a 0.5% gain in September. Retail sales are expected to grow by 0.3% while core sales are forecasted to rise 0.4% this time.
- US PPI: Wednesday, 13:30. U.S. Inflation remained unchanged in October after a 0.3% increase in the previous month. Economists expected a 0.3% gain. Rising prices of energy products were offset by declines in process of food and services. However on a yearly base, producer prices have climbed 0.8% in the 12 months stretching from October 2015 to October 2016. Meanwhile, core PPI edged up 1.6% in the past 12 months. In case wholesale prices continue to climb, The Fed will raise rates to control inflationary pressures. Producer prices are expected to inch up by 0.1% in November.
- US Crude Oil Inventories: Wednesday, 15:30. U.S. crude stocks fell 2.4 million barrels during the week ended Dec. 2, exceeding forecasts for a 1.4 million-barrel draw. OPEC agreed to cut output by approximately 1.2 million barrels per day from January to reduce global oversupply and boost oil prices. The organization expects non-OPEC countries will contribute a further 600,000 barrels per day of cuts.
- FOMC Economic Projections and Federal Funds Rate: Wednesday, 19:00. The last Economic Projections report issued in September showed the Fed expects GDP growth of 1.7% to 1.9% in 2016, compared to its previous outlook of 1.9% to 2.0%. Furthermore, the Fed also forecast an unemployment rate of 4.7% to 4.9% this year, more than expected in the prior forecast of 4.6% to 4.8%. In the Fed’s Funds Rate meeting in November, policy officials decided to leave rates unchanged strongly hinted that a rate hike is likely in December. In her first public speech since the election of Donald Trump, the Federal Reserve chairwoman, Janet Yellen, said interest rates could rise “relatively soon since Trump’s victory did not affect the outlook for US growth, suggesting the Fed will make the move in December. The fed is expected to raise rates to 0.75% this time.
- Australian employment data: Thursday, 0:30. The Australia employment market added nearly 10,000 jobs in October, but the unemployment rate remained unchanged at 5.6%, since the workforce participation fell to a decade low, reaching 64.5%. The jobs gain was driven by 41,500 full-time positions offset by a 31,700 decline in part-time jobs. Economists expected a job creation of 20,300 and a 5.6% unemployment rate. Analysts say there is a shift towards part-time employment and less full-time work which may lead to lower job security and a decline in consumer spending. The employment market is expected a big gain of 17,600 new jobs while the unemployment rate is forecasted to remain at 5.6%.
- UK rate decision: Thursday, 12:00. The Bank of England abandoned its plan to cut interest rates in November, saying rates could go either way. The central bank raised its growth and inflation forecasts for 2017 amid Sterling depreciation after the Brexit vote. The BoE was more optimistic regarding future growth prospects, estimating a 1.4% growth rate next year up from an estimate of 0.8% made in August. However, Britain’s access to EU markets could be limited, which would hurt growth over a certain period. The Bank also expects a record rise of inflation above its target over the next two to three years, peaking above 2.8% in early 2018, due to the sterling’s recent fall to a 31-year low against the U.S. dollar.
- US inflation data: Thursday, 13:30. U.S. consumer prices jumped in October to a six month high of 0.4%, following a 0.3% gain in the previous month. The reading was in line with forecasts. Rising gasoline costs and rents, were the main cause for the pickup in inflation. On a yearly base, CPI advanced 1.6%, the biggest year-on-year increase since October 2014. Meanwhile core CPI inched up 0.1% in October missing forecasts for a 0.2% rise. The rise in inflation as well as the continued strength in the labor market will enable the Fed to raise rates this month. Both US CPI and core CPI are expected to gain 0.2% in November.
- US Philly Fed Manufacturing Index: Thursday, 13:30. Manufacturing activity in the Philadelphia area continued to expand at a slower pace in November, registered 7.6 points from 9.9 in October. The majority of indexes remained positive. New orders increased to 18.6 from 16.3, shipments rose to 19.5 from 15.3. However, the number of employees remained negative at minus 2.6, but has improved from minus 4.0 in the prior month. The prices-paid index edged up to 27.5 from 7.0, while the prices-received index climbed to 16.0 from minus 3.7. The Philly Fed Manufacturing index is expected to rise to 9.1 this time.
- US Unemployment Claims: Thursday, 13:30. The number of Americans filing new claims for unemployment benefits dropped from a five-month high to 158,000 for the week ended Dec. 3, indicating US labor market continues to strengthen as the economy gains momentum. This positive data is likely to prompt a rate hike this week. This was the 92nd straight week that claims were below 300,000, indicating a strong and healthy labor market. The four-week moving average of claims increased 1,000 to 252,500.
- US Building Permits: Friday, 13:30. The number of building permits, predicting the pace of activity in the coming months, increased 0.3% in October from the prior month to a seasonally adjusted annual rate of 1.229 million, the highest pace in nearly a year. Permits for single-family homes, rose 2.7% to a rate of 762,000. Both single and multifamily starts show the construction sector is expected to rebound over the next couple of months. Steady job growth, wage increase and low interest rates on mortgages boosted demand. But low inventory of new and existing homes is driving prices higher scaring away potential buyers. However, home builders survey showed builder remained confident about the single-family housing market for new homes.
That’s it for the major events this week. Stay tuned for coverage on specific currencies
*All times are GMT.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar
- For the Swiss Franc, see the USD/CHF forecast.