A Slow Start to the Week for Global Economic News
In a relatively quiet start to the week after a busy last few days which saw a robust non-farm payrolls report in the US fuelling the possibility of a Federal Reserve (Fed) rate rise in December, attention will gradually shift towards Wednesday’s UK employment report. The dovish reaction of the Bank of England (BoE) in its last MPC meeting pointed out that the rate setters are in no hurry to raise its key rates. Nevertheless, wage earnings data in the UK alongside second-tier indicators on retail sales and house prices this week would still be scrutinised.
In Europe, data earlier today indicated that German trade surplus expanded for September, with exports outpacing expectations as worries about slowing growth in the emerging markets eased, supporting the German traders.
Pound Sterling – UK Markets
Last week’s dovish BoE report and a robust US non-farm payrolls data weighed on Sterling and dragged the Pound – US Dollar currency pair below the 1.51 mark on Friday. This week will be relatively quieter in terms of notable UK economic data, with the highlight being Britain’s employment and October’s tally for the claimant count report scheduled in the mid-week. Expectations are for the jobless rate to remain unchanged for September and wage earnings to show a modest income growth for the three months ended October. A confirmation of the forecasts coupled with the recent dovish BoE rhetoric will likely keep the Pound under pressure against the major currencies. With nothing much to take guidance from, in the remainder of the week, second-tier data including BRC same store sales and RICS house prices data will be eyed to gauge the health of the UK economy.
The National Institute of Economic and Social Research in the final session of last week indicated that UK economic output grew by 0.6% for the three months to October, up from the 0.5% growth seen in the three-month period ended September.
US Dollar – US Markets
St. Louis Fed President James Bullard on Friday sounded very optimistic about the Fed raising its key interest rates at its December meeting on the back of robust US labour market data and as fears related to global growth factors subsided. He indicated that the monetary policy committee in October removed the key note citing global factors and suggested that the zero interest rate policy might end soon, depending on the upcoming data. The surge in the US nonfarm payrolls and an unexpected slide in the unemployment rate for October, as published on Friday, raised the already strong likelihood that the US central bank will embark into monetary policy tightening as soon as in its December meeting, halting a seven-year run of near zero policy. The Fed’s labour market conditions index, which includes a variety of indicators, is expected to show a considerable improvement later in the day.
With no additional key data scheduled for release in the session ahead, market participants will await US data on retail sales and Michigan University’s consumer morale report due on Friday to gather more evidence that supports a rate rise decision this December.
Euro – European Markets
This morning, the Euro has somewhat recovered from its previous session losses and is trading higher against its key peers. In economic news which came out earlier today, German trade surplus widened well above expectations for September as strong demand in the US helped cushion the blow on the nation’s exporters in August which was due to a slowdown in emerging markets. In September, German exports surpassed market expectations to post its strongest reading since December 2014. Also, data showed that German imports bounced back in September after plunging in the prior month. Additionally, the just out data print showed that investors were more upbeat about the current situation in the Euro zone for November, suggesting that the Euro area has likely shrugged off global growth concerns.
Of late, Euro area indicators have indicated that the region remains on track for a moderate economic growth. Official Q3 Euro zone growth figures later in the week will confirm this. Also, final consumer inflation prints in the Euro zone’s four largest economies, due this week, will be eyed to factor into expectations of more QE by the ECB in December.
Other Currencies – Highlights
The Japanese Yen has extended its losses against the US Dollar into the new week, with the currency pair currently trading above the 123.00 mark. The Japanese currency on Friday lost ground against the greenback following the release of a better than expected US jobs report which bolstered expectations of a Fed rate rise in December. Meanwhile, an upbeat wages print published earlier today in Japan failed to boost the Japanese Yen. Data showed that the nation’s labour cash earnings rose higher than market estimates for September, from a downwardly revised wage growth in August, as higher bonuses contributed to the outperformance during the period. World News Feed The improvement in the monthly pay data might likely pave the way for the Japanese central bank to achieve its desired inflation target, who have been putting pressure on Japanese firms to use their record cash piles to boost wages and capital expenditure in an attempt to generate private sector led growth by World News Feed
Going forward, Japan’s trade and current account data scheduled later today might draw some market interest.