The Week Ahead: US Tax Reform, Central Bank Speeches and Policy Meeting Minutes
James Chen, CMT November 17, 2017 1:04 PM
The week ahead will be slower in terms of economic data than the past week. Contributing to this slowdown will be the major Thanksgiving holiday in the U.S. Aside from speeches by heads of key central banks, including the European Central Bank, Reserve Bank of Australia, Federal Reserve, and Swiss National Bank, the week will be dominated by the release of minutes from several central bank meetings.
The past week saw a drop for the US dollar as concerns about whether and when a new US tax reform plan would make its way through Congress initially weighed on both US stocks and the dollar. On Thursday, however, the US House of Representatives passed its Republican tax reform bill, alleviating some of the pressure on equities and, to a lesser extent, the dollar. The US Producer Price Index for October came out on Tuesday significantly higher than expected at +0.4% against a consensus forecast of +0.1%, but Wednesday’s Consumer Price Index dropped down to +0.1%, as expected. US retail sales data on Wednesday was a mixed bag, with the headline number of +0.2% beating estimates while core retail sales (excluding automobiles) came in below consensus at +0.1%. On Friday, both US building permits and housing starts for October came in higher than expected. Overall, US economic data this past week was relatively mixed. Largely driving the US dollar’s move down were concerns over tax reform and fiscal policy as well as a sharp upsurge for the euro.
The big currency move this past week, as noted, occurred in the euro, which was boosted sharply early in the week by continued improvements in economic data from the Eurozone. These positive releases have helped to keep the shared currency aloft despite a European Central Bank that has shown reluctance in tightening monetary policy. The most salient news boosting the euro this past week was a better-than-expected German Q3 GDP reading of +0.8% against a prior consensus forecast of +0.6%. Additionally, Italy’s Q3 GDP was also strong at +0.5%, matching its best reading in around seven years.
The British pound climbed modestly against the US dollar in the past week but economic data from the UK was mixed. Year-over-year CPI came in slightly lower than expected at 3.0% against a prior forecast of 3.1%. UK wages rose more than expected and jobless claims were significantly lower than expected, but the UK job market showed some signs of slowing, as employment dropped by 14,000. This is the first decline since late last year and the largest decline since mid-2015. Finally, October retail sales in the UK increased by more than expected.
From Australia, the jobs report on Thursday was a disappointment. Jobs increased by only 3.7K in October against a prior consensus forecast of 17.8K. And while the unemployment rate ticked down to 5.4% from 5.5%, this drop was largely due to a decline in the labor participation rate. The Australian dollar has been falling sharply against the US dollar for the past two months, and tentatively broke down below a key support level on Friday.
Finally, the Canadian dollar has also continued its general weakening trend against the US dollar. Canadian CPI inflation data for October was released on Friday. Although the CPI came out as expected at +0.1%, it was lower than the previous month and generally showed a trend of lagging inflation. The Canadian dollar has been pressured in recent months as the Bank of Canada has become increasingly dovish and recent economic data has been relatively weak. Like the Australian dollar, the Canadian dollar has generally been falling against the US dollar in the past two months, resulting in a clear short-term uptrend for USD/CAD.
The week ahead will be slower in terms of economic data than the past week. Contributing to this slowdown will be the major Thanksgiving holiday in the U.S. Aside from speeches by heads of key central banks, including the European Central Bank, Reserve Bank of Australia, Federal Reserve, and Swiss National Bank, the week will be dominated by the release of minutes from several central bank meetings. These minutes will be from the RBA, Fed, and ECB. Also included in the week’s schedule will be US durable goods orders, New Zealand retail sales, Eurozone services and manufacturing PMI data, UK GDP, and Canadian retail sales.
Here are some of the key events scheduled:
· Monday, November 20:
o European Central Bank’s Draghi Speech
· Tuesday, November 21:
o Reserve Bank of Australia Monetary Policy Meeting Minutes
o Reserve Bank of Australia’s Lowe Speech
o US Federal Reserve’s Yellen Speech
· Wednesday, November 22:
o US Durable Goods Orders and Core Durable Goods Orders (M/M)
o US Weekly Unemployment Claims
o US FOMC Meeting Minutes
· Thursday, November 23:
o New Zealand Retail Sales and Core Retail Sales (Q/Q)
o French Flash Manufacturing PMI
o French Flash Services PMI
o German Flash Manufacturing PMI
o German Flash Services PMI
o Eurozone Flash Manufacturing PMI
o Eurozone Flash Services PMI
o UK Second Estimate GDP (Q/Q)
o European Central Bank Monetary Policy Meeting Accounts
o Canada Retail Sales and Core Retail Sales (M/M)
o Swiss National Bank’s Jordan Speech
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.