Drama in the UK parliament and hopes for a US-Chinese trade deal dominated the scene. What’s next? While Brexit remains in the limelight, the ECB’s rate decision and Chinese GDP compete for attention. How much has the world slowed down?. Here the highlights for the next week.
The UK parliament rejected May’s Brexit deal by a whopping majority of 432 to 202, the greatest defeat for a British government in the modern era. Nevertheless, this opened the door to various options, including no Brexit at all, and the pound advanced. Hopes for a deal between China and the US continued supporting commodity currencies. In the euro-zone, additional signs of weakness weighed on the common currency. In the US, the retail sales were not published due to the government shutdown, which begins weighing on the US economy. However, we learned that consumer confidence is falling, adding to concerns.
- Chinese GDP: Monday, 2;00. The world’s second-largest economy is feeling the pressure from the trade war with the US and reflects the global slowdown. Various figures such as inflation and also industrial output (published alongside this GDP report) have shown a few initial signs. But how bad is the situation? The overall number will provide further data. After reporting an annualized growth rate of 6.5% in Q3, a minor deceleration to 6.4% is on the cards now. How reliable are official Chinese figures? In any case, the data affect sentiment.
- UK jobs report Tuesday, 9:30. While Brexit grabs the headlines, the economy is still of interest and could move the pound at least temporarily. With a low unemployment rate at 4.1%, the focus remains on wage growth. A repeat of the robust annual increase of 3.3% is expected for November. The Claimant Count Change, or jobless claims, is a more up-to-date number for December and carries expectations for an increase of 20.1K after 21.9K last time.
- New Zealand inflation: Tuesday, 21:45. The small South-Pacific nation releases inflation data only once per quarter, making every publication matter. After a jump of 0.9% in Q3, the last quarter of 2018 is projected to be flat: 0%. This could increase calls for a rate cut.
- Japanese rate decision: Wednesday morning. The Bank of Japan has not altered its monetary policy for a few years, as inflation remains poor. Core inflation is far from the elusive 2% target despite a negative interest rate at 0.1% and the Tokyo-based institution’s pledge to keep 10-year yields close to 0%. No change is expected now, but Governor Kuroda could announce lower forecasts for inflation given the global slowdown.
- Australian jobs report: Thursday, 00:30. Australia gained no less than 37K positions in November, much better than expected. The unemployment rate rose to 5.1% but this is the result of an increase in the participation rate. The report for December is forecast to show an increase of 18.1K jobs in the land down under. The jobless rate is expected to remain unchanged.
- Euro-zone rate decision: Thursday, the decision at 12:45, press conference at 13:30. The European Central Bank ended the Quantitative Easing program, or bond-buying scheme, at the end of 2018. It projected that the first rate rise will come in September at the earlier, but this may have to be pushed back due to increasing signs of an economic slowdown. Italy probably entered a recession and Germany narrowly averted it. France suffered from protests and other countries cannot pull the currency bloc forward. The Frankfurt-based institution does not publish new forecasts at this time and may refrain from its guidance. However, President Mario Draghi could express more caution in the press conference, weighing on the euro. An upbeat approach could boost the common currency.
*All times are GMT
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