Last week the USD had declined in the currency market after the sharp rise caused by the victory of Donald Trump in the presidential election. However, Italian referendum, which was held last Sunday, triggered sharp decline in the major world currencies against the USD. Italian people did not support constitutional reform. Such outcome of the voting has increased uncertainty about the prospects for the global economy.
Last Friday, US labor market data was released. NFP report was not good enough to encourage further rise in the USD. It seems that the market has already incorporated interest rate hike by 0.25% in December into the price of the USD. This means that if the Fed does rise the rate in December the USD will not sharply go up.
A lot will depend on the comments of the Fed about the future plans. According to CME Group, probability of the rate hike in December is estimated at about 93%.
Macro-economic statistics and important news of this week are as follows:
12:00 (GMT+3) – Markit index of business activity in the European service and manufacturing sectors (PMI in the Eurozone in November). PMI is an important indicator of business conditions and overall state of economy in Eurozone. If the index exceeds 50, it is a positive factor for EUR and Vice versa.
17:45 – 18:00 – Markit index of business activity in the US service sector and composite PMI in November; ISM business activity index in the US service sector in November; index of the US labor market conditions in November.
03:01 – Retail sales report for October of the British Retail Consortium (BRC).
06:30 – Interest rate decision of the RBA. Currently, interest rate is at the level of 1.5%. Market expects that the rate will be left at the current level. In an accompanying statement, the RBA will comment on the rate decision and indicate prospects for the future monetary policy. If the RBA shows “hawkish” attitude, markets will interpret this as the probability of the rate hike at the next meetings, which is a positive factor for AUD, and Vice versa. The RBA believe that possible economic benefits from the rate cuts do not justify the increasing risks of the household debts. RBA’s decision to keep the rate at the current level will support the Australian dollar.
11:15 – consumer price index in Switzerland for November.
13:00 – GDP in Eurozone for Q3.
16:30 – US trade balance for October.
17:00 – price index for dairy products, which may cause the rise in volatility in the NZD. In the past two weeks the price of the dairy products has increased by 4.5% at the dairy auction. Note that the main item of the country's exports is the milk powder. The rise in price of the dairy products supports the NZD.
18:00 – Industrial orders in the USA in October.
18:00 – Index of business activity in Canada for November.
00:30 – Report on changes into US oil stocks for the last week from the American Petroleum Institute (API).
01:00 – A speech of the head of RBNZ Mr. Wheeler.
01:30 – activity index in the c Australian construction sector for November.
03:30 – Australian GDP for Q3. In the previous quarter GDP has grown by 0.5% (+3.3% on the annual basis).
18:00 – NIESR GDP in the UK for November. This index evaluates growth rate of the British economy for the last three months. NIESR’ report will be published before the release of the official GDP and can affect monetary policy decisions of the Bank of England. This release usually causes sharp rise of volatility in the pairs with the pound.
18:00 – Interest rates decision of the Bank of Canada. Currently interest rate is at the level of 0.5%. It is expected that the rate will be left at the same. In the accompanying comments the Bank of Canada will give reasons for its decision and outline current economic situation and future monetary policy. Volatility in the Canadian dollar will increase.
18:30 – US Department of Energy will issue weekly report on stocks of oil and oil products.
02:50 – Japanese GDP for Q3. Japanese economy is the third largest economy of the world after USA and China. It accounts for approximately 10% of the global GDP. Weak GDP data will affect the decision to expand stimulus measures by the Bank of Japan, which will add pressure on the Yen is a safe-haven asset, and may trigger the decline the price of the Yen in the exchange market.
03:01 – RICS housing prices index in the UK for November.
03:30 – Foreign trade balance of Australia for October.
05:30 – Foreign trade balance of China for November. Chinese economy is the second largest in the world after the USA. Therefore, macro-economic data of this country has a significant impact on the global financial markets, on the Yuan and the other Asian currencies, the USD and commodity currencies, as well as Chinese and Asian stock indexes.
15:45 – Interest rate decision by the ECB. This is an important event, which is closely monitored by the entire financial world. The main European interest rate (refinancing rate for commercial banks) is at a level of -0.4%. The ECB has been lowered the rate from $4.25% in 2008 to the record low current level. In addition, the ECB continues QE program in the Eurozone monthly buying European assets for the amount of 80 billion euro (88 billion USD). Meanwhile these measures have not led to the improvement of macro-economic statistics and the increase in inflation. Governor of the ECB Mario Draghi can announce changes to the program, which is due to complete in March 2017. Expectations of such decision add pressure on the Euro.
16:30 – Press conference of the ECB, and a speech by Mario Draghi. Volatility in all financial markets is likely to increase. Mr. Draghi is famous for the comments, which may increase volatility in the financial markets. Sometimes the price of the Euro changed by 3-5% in a short time after his comments.
00:45 – Retail sales in New Zealand in November with the use of electronic payment cards.
03:30 – Mortgage loans in Australia for October.
04:30 – PPI and CPI in China for November. CPI is the key indicator of inflation and changes to the purchasing trends. A significant rise in the consumer price index is a sign that inflation negatively affects national economy and the People's Bank of China may tighten monetary and fiscal policy, which will cause the rise in the Yuan.
09:45 – Unemployment rate in Switzerland for November. Swiss unemployment rate remains one of the lowest in the world. A month ago the index was at the level of 3.3%.
10:00 – German foreign trade balance for October. Germany is the engine of the entire economy of Eurozone.
11:30 – Forecast of consumer price inflation in the UK. This data, along with the GDP has the strongest influence on the monetary policy decisions by the Bank of England. Volatility in the pound and FTSE100 may increase.
12:30 – British foreign trade balance for October.
21:00 – Report on the active drilling rigs by the US oilfield services company Baker Hughes. This index is an important indicator of activity in the US oil sector. This index has a significant impact on the oil prices. At the moment the number of active rigs in the U.S. is 477.