The new year has kicked off with a minor reversal of 2019’s dollar drops. And now, the first full week already features top tier events, culminating in the Non-Farm Payrolls. Where will currencies go? Here the highlights for the upcoming week.
The US dollar kicked off 2020 with a recovery – undoing the losses it suffered in late 2019 due to end-of-year flows. The US and China are set to sign the trade deal on January 15, while China announced more stimulus by cutting the Reserve Requirement Ratio (RRR). Fears of a no-trade-deal Brexit have crept in once again. Mid East tensions significant escalated after the US killed Qassem Suleimani, considered No. 2 in the Iranian regime. Oil prices spiked and safe-haven assets enjoyed demand as well. Tehran’s pledge to retaliate will be examined.
- Euro-zone inflation: Tuesday, 10:00. November’s Consumer Price Index figures were quite encouraging. Headline CPI stabilized at 1% yearly while Core CPI accelerated to 1.3%, matching the peak 2019, which was the highest since 2013. The preliminary release for December 2019 is forecast to show that underlying inflation remained at 1.3% while headline prices accelerated to 1.3%. The European Central Bank is watching these figures.
- ISM Non-Manufacturing PMI: Tuesday, 15:00. America’s services sector expanded at a satisfactory pace throughout 2019, reaching 53.9 points in November – above the 50-point threshold that separates expansion from contraction. An increase to 54.5 points is on the cards for December. Apart from providing a snapshot on the sector, the publication serves as a hint towards Friday’s jobs report.
- ADP Non-Farm Payrolls: Wednesday, 13:15. America’s largest provider of payroll software reported a meager rise of only 67K positions in November – below expectations. However, that statistic was distorted by the strike at General Motors. The report for December will likely be better correlated with the official employment data. Even if both figures remain uncorrelated, markets are expected to react.
- ECB Meeting Minutes: Thursday, 13:30. The European Central Bank publishes details from the December meeting, overseen by President Christine Lagarde for the first time. The document may reveal tendencies in the bank under its new management, and perhaps provide hints toward the next moves. Moreover, as Lagarde announced the beginning of a strategic review, it will be interesting to see if the Frankfurt-based institution is leaning toward a more dovish policy goal or toward a more hawkish one.
- US Non-Farm Payrolls: Friday, 13:30. November’s jobs reports was a blockbuster – no fewer than 266,000 jobs were gained in the world’s largest economy. Alongside upward revisions to previous months and a healthy yearly wage increase of 3.1%, the dollar advanced nicely. Expectations for December’s report are more cautious. Economists foresee an increase of 172,000 positions while Average Hourly Earnings are expected to hold up at 3.1%. The data feed into the upcoming Fed decision.
- Canadian jobs report: Friday, 13:30. After several superb labor market figures in mid-2019, the latest statistics from Canada fell short of expectations. The nation lost a whopping 71,200 positions in November, sending the unemployment rate to 5.9%. Markets expect a 20,000 gain in December, with the unemployment rate falling to 5.8%.
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