What mattered last week:
- Some easing in U.S. – China trade tensions last week as China resumed some commodity imports from the U.S. and announced the 25 percent tariff imposed on vehicles as a tit-for-tat measure will be scrapped starting Jan 1.
- President Trump indicated he would personally intervene in the Huawei case if it would help negotiators seal a deal on trade with China.
- Offsetting U.S.-China trade progress was concerns around global growth as economic data in China and Europe continued to slow and which resulted in the ECB cutting growth and inflation forecasts for 2019.
- In the UK, Prime Minister Theresa May facing an embarrassing defeat, delayed the meaningful vote on Brexit and then survived a vote of confidence in her leadership. GBPUSD fell below 1.2500 for the first time since April 2017.
- The Italian government proposed lowering the Italian budget deficit target for 2019 from 2.4% of GDP to 2.04%. Italy are moving closer to avoiding disciplinary action from the EU.
- In the U.S., the S&P500 closed the week right on critical support 2600/2580. The window remains open for the Santa Claus rally but only just.
- Another tough week for local investors as the weak economic data in China and lower U.S. equities resulting in the AUDUSD finishing the week back near .7150. While the ASX200 slipped -1.40% to close the week at 5602.
For the week ahead, the key events are:
Australia: Mid-Year Economic and Fiscal Outlook (Monday), HIA new home sales and RBA meeting minutes (Tuesday), employment data (Thursday).
- MYEFO (Mon): Higher than expected commodity prices, and strong employment has resulted in a Federal budget running about $9bn per annum better than expected. This is likely to see a lower than expected deficit this year with the budget surplus for 2019-20 revised higher from $2.2bn towards $11bn. All of which is likely to see voters enticed with “generous” tax cuts and other spending promises ahead next year’s Federal election, likely to be held in March.
- AU employment (Thurs): The market is looking for a 20k gain in jobs in November and for the employment rate to remain unchanged at 5.0%.
China: nothing scheduled
Japan: Balance of trade (Tuesday), BoJ interest rate decision and CPI (Thursday).
- BoJ meeting (Thurs): No change is expected from the Bank of Japan.
U.S.: NAB housing market index (Tuesday), building permits and housing starts (Wednesday), FOMC (Thursday), core PCE, personal income & personal spending, durable goods (Friday).
- FOMC (Thurs): A 25bp hike at this week’s meeting is widely expected. Hence the focus will be on Fed Chair Powell’s press conference, dots and the accompanying statement. It seems likely the language in the statement around rate guidance will change from “further gradual increases” to one that stresses data dependency.
Canada: CPI (Thursday), GDP and retail sales (Friday).
- CPI (Thurs): The fall in gasoline prices is likely to see headline inflation fall from from 2.4% to 1.9% y/y in November. For core inflation, the rate is expected to remain relatively unchanged at 1.5% y/y.
Euro Area: Balance of trade (Monday), IFO (Tuesday), PPI (Wednesday), EA current account (Thursday), German and EA consumer confidence (Friday).
UK: Brexit headlines too continue CPI and PPI (Wednesday), Bank of England interest rate meeting and retail sales (Thursday), consumer confidence (Friday).
- BoE meeting & minutes (Thur): The uncertainty around how Brexit will play out is likely to keep the BoE on hold this month and possibly until after February.
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