Monday, November 21
Canada is to publish data on wholesale sales.
European Central Bank President Mario Draghi is to testify about the
bank's Annual Report before the European Parliament, in Strasbourg.
Tuesday, November 22
New Zealand is to publish data on retail sales.
The UK is to report on public sector borrowing.
Canada is to release data on retail sales.
The U.S. is to produce a report on existing home sales.
Wednesday, November 23
Financial markets in Japan will remain closed for a holiday.
New Zealand is to report on producer price inflation.
In the UK, Chancellor Philip Hammond will present his autumn budget statement to parliament on Wednesday.
The euro zone is to release survey data on private sector activity.
The U.S. is to release data on durable goods orders, initial jobless
claims, new home sales and a revised report on consumer sentiment.
Later in the day, the Fed is to publish the minutes of its November meeting.
Thursday, November 24
The Ifo Institute is to release data on German business climate.
Financial markets in the U.S. are to remain closed for the Thanksgiving holiday.
Friday, November 25
Japan is to release data on consumer price inflation.
The U.K. is to round up the week with revised data on third quarter growth.
US existing home sales rose 2.0% in October to an annual rate of
5.60mn from an upwardly-revised 5.49mn the previous month, which was
originally reported at 5.47mn. Sales were above expectation of 5.45mn
and the highest rate since February 2007, exceeding the previous 2016
peak seen for June.
The median price for all housing types increased to $232,000 for the
month, an annual increase of 6.0% and the 56th consecutive annual
The total housing inventory for sale declined to 2.02mn to register a
4.3% annual decline, the 17th consecutive decline and unsold inventory
declined to 4.3 months supply at the current sales pace from 4.4 months
Sales increased across all four regions on the month and there were
also annual increases across all four with a 10.4% annual increase for
First-time buyers accounted for 33% of sales from 34% in September and 31% in October 2015.
There will be increased uncertainty surrounding the near-term outlook
on political and economic grounds. Average 30-year mortgage rates were
3.47% in October, but have now increased to around 4.00%. Buyers may
look to rush and buy on fears that rates will increase further, but
there will also be important affordability issues, especially with
valuations already stretched. Inevitably, there will also be uncertainty
over economic policies pursued by the new Administration, which could
act to accelerate or deter house purchases.
Chinese business confidence improved in November, a sign that increased stability was resonating with business leaders.
The MNI Deutsche Borse Group business sentiment indicator rose 1.7% to 53.1 in November, after falling 6.5% in October to a five-month low.
“Businesses are finding additional support in a depreciating currency
environment while new orders and output remain elevated. On the back of
this, an increasing number of firms are upbeat about hiring. All in
all, our survey suggests Chinese businesses have weathered various macro
headwinds reasonably well,” MNI said in a statement.
The business sentiment indicator provides a recurring snapshot of the
Chinese economy through the lens of business executives in the
manufacturing and services industries.
The world’s second-largest economy showed signs of progress in recent
months, with trade and inflation figures topping analysts’ estimates.
Earlier this month the General Administration of Customs reported
further improvements in inflation, pointing to a more balanced economy.
Meanwhile, a separate gauge of producer inflation surged.
Factory-gate prices, a measure of slack in the country’s highly inefficient manufacturing sector, rose 1.2% in the 12 months through October.
orders sees the fastest growth in 13 month but mainly on domestic
demand than exports. There was a modest uplift in employment.
manufacturers enjoyed a strong post-election bounce in November,
further tilting the scales toward the Fed hiking rates in December. Many
factories reported that demand from customers had picked up as
uncertainty about the election result cleared. Domestic demand rose
especially sharply, helping to make up for subdued export growth, linked
in turn to the strong dollar." Said Chris Williamson at Markit.
dropped to new reaction lows earlier today following the release of
strong US economic data which propelled dollar to new highs. EUR/USD
fell to 1.05262 for a low and is currently trading at 1.0550, down 0.70%
from Tuesday’s North American close.
for October surged past estimates, rising 4.8%, well above consensus
expectations of a 1.5% monthly increase. The rise in durable orders was
due to a 12% spike in transportation orders. In addition, new orders in
September were revised up to 0.4% from -0.1%.
Excluding transportation, durable orders increased 1% in October,
better than the consensus estimate of a 0.3% increase. This follows an
unrevised 0.2% increase in September. Orders have increase in four of
the last five months, suggesting some firming in trends after a
questionable first half of the year.
EUR/USD continues to test key support at the December 2015 corrective
bottom at 1.05237. Not far below this level is the major corrective
bottom established in March 2015 at the 1.04590 level. A drop below the
key zone of support defined by these lows would confirm a breakdown from
a multi-month trading range, as can be seen on the monthly chart.
Such a development would call for further losses in EUR/USD the
months ahead. On such a breakdown, the next target would become the
psychologically important 1.0000 level. The next level of chart-based
support does not come into play until the 0.96100 level.
he dollar held steady at a 14-year peak against the other majors
currencies on Thursday, amid ongoing optimism over the U.S. economy and
as trading volumes were set to remain thin for the Thanksgiving holiday.
The greenback remained supported amid expectations that
President-elect Donald Trump’s plans to ramp up fiscal spending and cut
taxes will spur economic growth and inflation.
Faster growth would spark inflation, which in turn would prompt the
Fed to tighten monetary policy a faster rate than had previously been
The U.S. dollar has also been boosted by bets that the U.S. central bank will almost certainly raise interest rates next month.
Fed Chair Janet Yellen on Thursday reiterated that a rate hike “could well become appropriate relatively soon.”
In a matter of 3 weeks, the U.S. dollar appreciated more than 6 percent versus the Japanese yen and nearly 4 percent versus the euro. The Dollar Index reached its highest level in 13 years but the dollar's dream-run met resistance on Friday after making an unexpected push higher that took USD/JPY within 10 pips of 114. The latest pullback/consolidation has many investors wondering if its time to sell dollars. While there is no question that the dollar is getting ahead of reality and as tempting as it may be to pick a top, the latest pullback is small, which means the better trade should be buying the dollar’s dips until Fed Chair Janet Yellen tells us otherwise. It is important to recognize that the spectacular rise in the U.S. dollar and complete collapse in bonds is driven by 3 key factors – new positioning, the prospect of an aggressive fiscal spending program from Donald Trump and the expected impact on inflation. The Fed has been eager to raise interest rates in order to get ahead of rising inflation and the market thinks they will need to be even more proactive going forward. To this point – Fed Fund futures are pricing in a 100% chance of a rate hike by the Fed next month and nearly 40% chance of another 25bp rate hike by May 2017. The second rate hike is not expected until the middle of next year so the dollar could extend higher if Yellen suggests that it could come sooner.
With that in mind, Trump hasn’t even assumed office yet and the market is trading as if an official stimulus program has been announced. Trump has shifted his views on many issues and while we do not expect him to backtrack on spending, passing a stimulus program may take longer than he anticipates. Also, considering the enormous burden of paying for the package, Congress may push for a diluted version that provides slower growth spread out over a longer period of time. Fiscal spending could take many shapes and may not be as quick and aggressive as the market hopes and for these reasons, dollar bulls and bond bears could be getting ahead of themselves. But in order for the dollar to fall, it needs a catalyst. We could see more profit taking ahead of nonfarm payrolls but the move is likely to be shallow and the chance of further strength is about even. A lasting reversal in the dollar would need to be driven by less-hawkish comments from Yellen. Besides signaling that a December hike is imminent, she has not provided much guidance on what comes next. We know that this past week’s U.S. economic reports, including existing home sales, durable goods, the University of Michigan consumer sentiment index and the Richmond Fed index all beat expectations supporting the idea that the U.S. economy is improving. Next week’s reports including consumer confidence, the ISM manufacturing index and nonfarm payrolls should reinforce that view. However 10-year Treasury yields have increased 80bp over the past 2 months and this rise automatically raises financing costs, tightening financial conditions and effectively does a lot of the Fed’s work for them. Had interest rates not increased so much, Yellen would probably signal an early 2017 rate hike but the 80bp rise in yields is the equivalent of 2 or 3 quarter-point hikes. We believe USD/JPY is a buy near 112.00 and we expect the currency pair to make another push above 114.00.