The Top Events/Releases for next week - page 5
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1. U.S. nonfarm payrolls for November
The Labor Department is scheduled to release data on nonfarm payrolls at 8:30AM ET (13:30GMT) Friday.
The consensus forecast is that the report will show the economy created 175,000 jobs in November, up from 161,000 in October.
The unemployment rate is expected to hold steady at 4.9% and average earnings are expected to increase by 0.2%.
Ahead of the nonfarm data, the ADP nonfarm payrolls report, which looks at private sector hiring, is due for release on Wednesday at 8:15AM ET (13:15GMT).
Analysts have forecast private sector jobs growth of 165,000 in November.
2. OPEC meeting
OPEC is to hold a meeting in Vienna on Wednesday aimed at finalizing the details of a proposed output cut, which it is hoped will reduce a global supply glut that has pressured oil prices lower for more than two years.
The producer cartel is attempting to get its 14 member states, along with non-OPEC member Russia, to implement coordinated production cuts.
Most analysts believe that some form of consensus will be reached, but doubts remain over whether it will be enough to support the market.
3. U.S. manufacturing data
The Institute for Supply Management is scheduled to release its manufacturing PMI at 1000AM ET (1500GMT) Thursday.
The report is expected to show a third straight month of expansion, with the index increasing slightly to 52.2 in November.
Also to watch in the U.S. next week are reports on consumer confidence, pending home sales and jobless claims.
4. Euro zone inflation data
The euro zone is to release the flash estimate on consumer price inflation on Wednesday, with headline inflation forecast to edge up to an annualized 0.6% from 0.5% in October.
The euro area is to round up the week with data on unemployment and producer price inflation on Friday.
5. ECB President Draghi delivers testimony
European Central Bank President Mario Draghi is due to testify about the ECB’s perspective on economic and monetary developments and the consequences of Brexit to the Economic Committee of the European Parliament in Brussels on Monday.
Investors will be looking for indications that the ECB is moving towards extending monetary stimulus at its December meeting.
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The top 5 events/releases for the current trading week
For the week starting November 28, 2016
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Key releases and events that will shape Forex trading for the week starting December 5th
1. ECB Council Meeting
The latest ECB monetary policy decision will be announced on Thursday December 8th at 07:45 EST.
Bank President Draghi will hold his regular press conference 45 minutes later.
This ECB meeting will be very important for underlying Euro sentiment. The bank has promised that there will be an announcement on the future of the bond-buying programme which, at present, is due to continue until March 2017.
The ECB will also have new staff projections extending into 2019 and these projections will be the basis for determining the appropriate monetary stance.
Draghi has promised that the ECB will preserve a high degree of monetary policy accommodation in order to raise inflation to the target rate and maintain a higher inflation rate.
There is, therefore, very little chance that the ECB would consider any abrupt ending of the bond-buying programme.
The ECB still faces the difficult task of balancing continued stimulus, while also nudging markets towards an eventual unwinding of the programme without causing a massive sell-off.
The bank will consider extending the full amount of bond purchases for at least another six months, but there is also the potential for the purchases to be extended for a shorter period. Potentially, the most likely outcome is a smaller or flexible rate of purchases for a longer period than six months.
The ECB will still be concerned that there will be insufficient bonds to buy and some measures to alleviate the situation are likely.
There have also been reports that the bank will look to lend additional bonds to alleviate stresses in the repo market. There is the potential for a shift in the composition of purchases to steepen the yield curve.
There is the possibility that the announcement of an extension will be delayed until the January meeting, which would trigger high volatility.
2. Italian Constitutional Referendum
The Italian referendum on Italian constitutional reform will be held on December 4th.
The referendum on constitutional reform is designed to make the Italian government work more effectively and make it easier for the controversial legislation to be passed by reducing the powers of the Senate.
The vote originally seemed something of a formality, but has increased in importance over the past few weeks, especially with the trend of global political upsets.
The mood of populism has given the vote a greater symbolic importance and, after originally having a comfortable opinion poll lead, the final polls suggested that the government was behind.
The stakes were increased by Prime Minister Renzi’s threat to resign if there was a defeat, although the situation has been complicated further by the threat of a resignation even if he wins the vote and uncertainty will remain a key factor.
Defeat would increase the risk of wider stresses within the Eurozone and intensify concerns over the French and German elections next year.
In simplistic terms, risk appetite will tend to deteriorate on a rejection, while a yes vote would boost near-term confidence in risk assets.
3. China Trade Balance
The latest Chinese trade data is due for release on Thursday December 8th local time (around 21:00 EST Wednesday).
There is no fixed time for the data and data in dollar terms is likely to be released slightly later than the data in yuan terms.
There is further underlying uncertainty surrounding the Chinese outlook, although the latest PMI data has been generally encouraging.
Weak data for imports would undermine confidence in the outlook for Chinese demand, while weak exports would maintain a cautious tone surrounding global growth trends.
In contrast, stronger data would spark fresh optimism surrounding both the Chinese and global economies.
The most important impact could be on bond yields with upward pressure on yields if there is robust data for the month.
China’s inflation data will be watched closely on Friday after the higher rates recorded last month.
The latest PBOC data on currency reserves, due for release on Wednesday, will be very important for underlying sentiment surrounding the yuan and global risk appetite.
4. Bank of Canada Monetary Policy Decision
The latest Bank of Canada Interest rate decision will be announced on Wednesday 7th December at 10:00 EST.
At this meeting, the Bank of Canada will not issue a Monetary Policy Report and there is no scheduled press conference from Governor Poloz.
There are expectations that the central bank will leave interest rates on hold and the lack of press conference also increases the likelihood of no policy changes.
The policy statement will, however, still be very important, especially as the bank faces much greater uncertainty surrounding the outlook.
The Canadian indicators have been mixed since the last policy meeting, but there have been important changes in market trends with upward pressure on bond yields and a sharp increase in oil prices following the OPEC production deal.
The Bank of Canada was already at a high degree of uncertainty surrounding exports trends and this uncertainty has been amplified by the Trump US Presidential election victory with the potential for a shift in US macro policies and trade stance.
Domestically, the central bank will be looking at trends in the housing sector and for any evidence that lending is coming under control after the imposition of lending restrictions.
Although there is a strong probability that policy will be left on hold, the overall stance and forward guidance will be very important for the Canadian dollar.
5. US ISM Non-Manufacturing
The latest US ISM non-manufacturing survey will be released on Monday December 5th at 10:00 EST.
The ISM non-manufacturing index retreated last month, although this followed a very strong gain in the previous survey.
The impact of the data tends to be diluted slightly when it follows the US employment report, but it will still contain important evidence on underlying trends in the dominant US services sector.
The overall tone in the report will offer some insights into confidence trends following the US elections and will offer insight into the overall economic conditions.
The data will be important for 2017 expectations after the November employment report recorded an unexpected decline in average earnings.
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1. European Central Bank meeting
The ECB is to hold its final monetary policy meeting of 2016 on Thursday.
Analysts are not expecting to see any further changes to policy, but the banks post-policy meeting press conference with President Mario Draghi will be closely watched for indications that the ECB is considering extending its bond purchasing program beyond March of next year.
2. New York Fed head William Dudley to speak
NY Fed President William Dudley is to speak about the macroeconomic outlook on Monday in New York.
This speech is to be followed by speeches from Chicago Fed President Charles Evans and St. Louis Fed head James Bullard.
Market watchers will be paying close attention ahead of the Fed’s keenly anticipated policy announcement following its December 13-14th meeting.
3. U.S. non-manufacturing data
The Institute for Supply Management is scheduled to release its non-manufacturing PMI for November at 1000AM ET (1500GMT) Monday.
The index is expected to tick up to 55.4 from October's 54.8.
Also to watch in the U.S. next week is Friday’s preliminary reading on consumer sentiment for December from the University of Michigan.
4. Bank of Canada meeting
The BoC is expected to hold rates steady at its meeting on Wednesday after data on Friday showing that the economy added 10,700 jobs in November and the jobless rate fell to 6.8%.
In October, the bank kept rates unchanged but said that it had actively considered cutting for the third time in two years.
5. Reserve Bank of Australia meeting
The RBA is expected to keep interest rates on hold at record lows of 1.5% at its meeting on Tuesday, despite recent mixed economic reports.
Meanwhile, Wednesday’s data on third quarter growth is expected to show that the rate of growth slowed slightly.
Gross domestic product is expected to have grown by 0.3% in the three months to September, after expanding by 0.5% during the second quarter. Annual growth is expected to come in at 2.5%, down from 3.3% in the second quarter.
Top FX Views & Trades For 2017
1. Stay long the USD in 2017, at least in 1H
Nowhere will policy rotation be as evident as in the US in 2017. The Fed path will continue to re-price higher as incoming US President Donald Trump delivers fiscal stimulus. Rising rates and USD will make it harder for non-US borrowers to refinance a wall of USD-denominated debt. Scarcity will push the USD to new cycle highs, further away from fair value.
2. EUR/USD below parity? Two option structures
We see EUR/USD heading to parity into spring. With general USD strength combining with European political uncertainty, a temporary overshoot is a distinct possibility. We recommend two risk profiles: 1) EUR/USD 6m European digital put strike 0.97 costing 13% and 2) zero-cost 6m downside seagull strikes 0.97/0.99/1.17.
3. Stay short the yen: Buy USD/JPY 6m call spread 1x1.5 strikes 118/120.5
The BoJ has its timing right. With global yields likely to rise further in 2017 (see SG FI Outlook 2017: The big hangover) and 10y JGBs credibly pegged around 0%, the yen can get much weaker still. The above structure is cost-free (indicative, spot ref: 114.30). It starts losing money only when USD/JPY breaks above 125, at which point the BoJ might struggle to defend the JGB peg (speculation about an adjustment of the long-term rate target would rise).
4. Brexit vote dust settles: selling cable volatility safely
After the post-Brexit-vote jitters, cable has reconnected with short-term rates. Sterling positioning has cleaned out its extreme shorts. The Brexit process will not be smooth, but is unlikely to deliver large surprises over the next six months. The settling dust and cable’s likely future range make GBP volatility a Sell. A naked short is much too risky, while the euro moving down and then up is likely to generate EUR/GBP volatility. So we suggest directional and volatility RV implementations circumventing the issue: 1) Buy GBP/USD 6m double no-touch 1.19/1.30 for only 13% and 2) go long EUR/GBP 1y volatility swap against GBP/USD 1y volatility swap.
5. Buy SEK and NOK vs AUD and NZD...
The SEK and NOK are best positioned to benefit from the reflation theme. The NOK has some significant catching up to do in the light of the rising oil price and local forward interest rates. With SEK inflation breakevens finally recovering, the Riksbank should turn less dovish. The AUD and NZD have had a relatively good 2016 so far as investors have climbed a wall of Chinese worries – we see little upside from here. The trade costs 0.6% per quarter, an acceptable cost given the excellent entry level.
6. ... or Buy SEK and CHF vs NZD and JPY
In a rising yield environment, we prefer the CHF to JPY as a safe haven, as the JGB peg will remain a drag on the JPY. The SEK is our favourite G10 currency for 2017, while the NZD is our least preferred.
7. Kiwi weakest G10 currency against USD
We expect the NZD to fall the most against the USD in 2017, reaching 0.64 by year-end. New Zealand remains highly exposed to a slowdown in Chinese demand, and the RBNZ won’t stay neutral in front of revived currency strength. Short rates already point toward a much lower NZD/USD. Downside medium-term kiwi volatility is expensive, suggesting RKO puts. Buy NZD/USD 1y put strike 0.68 RKO 0.59 for 0.98% (spot ref: 0.7135), which compares with 3.85% for the vanilla.
8. Trading more frequent intraday volatility spikes
The amplitude and frequency of black swan events in FX have increased in 2015-2016, suggesting a deep change in the nature of currency risk. Our findings (using extreme value theory), falling spot volumes, growth in electronic trading and tighter regulations point towards a durable transformation. A volatility regime with more frequent intraday volatility spikes improves the profit odds of rolling long gamma positions financed by short vega positions, especially when curves are steep. Variance/volatility swaps circumvent the spot execution risks involved in dynamic delta-hedging.
9. Regional EM: Short EMEA and LatAm against Asia (through to 1Q)
Regionally, EMEA (USD crosses) and LatAm will likely suffer more than Asia through to 1Q. While Asia is more sensitive via trade linkages, higher-beta regions with less favourable external positions (EMEA dollar crosses and LatAm) should do worse when overall risk sentiment is deteriorating. Long INR, IDR vs Sell TRY, MXN (6m carry -0.4%).
10. Short EM exposure: Long USD vs TWD and MXN Long USD-MXN:
The MXN looks to be on a downward track through to 1Q due to generalised pressure on EM currencies coupled with uncertainty regarding Trump’s trade and immigration policies. Brexit and NAFTA are different animals, but price action in GBP could be instructive in terms of understanding how the peso might trade – GBP rallies have been limited and short positions have been very sticky. Long USD-TWD: This offers neutral carry and is appealing against a backdrop of EM currency weakness, Chinese growth expected to print at 6.1% in 2Q, ongoing CNY depreciation and the risk premium related to Trump’s policy biases.
11. EM relative value: Short TRY-RUB, long INR-KRW, short SGD-INR
Owning positive carry relative value structures that are directional to a weaker USD are appealing. Short TRY-RUB on relative sensitivities to Trump’s policies, growth and external balances, and capital outflow risks. Long INR-KRW on political risks in Korea, sensitivity to Trump’s policies, and exposure to Chinese growth and FX depreciation. Short SGD-INR provides attractive vol-adjusted carry; SGD will likely underperform as long as expectations of MAS easing remain in place.
12. EM Trump basket: Short MXN, TWD, KRW vs long RUB, INR, CLP
Currencies sensitive to Trump’s policies and a deterioration in risk sentiment are expected to underperform (MXN, BRL, ZAR, TRY, KRW, TWD, PHP), while those more insulated (INR, IDR, THB, RUB, CLP) should outperform. Long RUB, INR, CLP vs Sell MXN, TWD, KRW (6m carry +1.2%).
13. CNY depreciation: Own 1y CNH seagull structure (6.80/7.13/7.50 strikes)
Our base-case scenario envisions USD/CNY rising to 7.30 by the end of 2017. The structural richness of implied volatility over realised argues for short volatility structures. Additionally, short downside volatility is appealing because there are few fundamental reasons for the CNH to trade meaningfully stronger over the next year. Owning a 1yr USD/CNH zero-cost seagull structure (6.80/7.18/7.50 strikes) offers a maximum gain of 4.2%. With no digital risk involved and limited convexity, the position can be conveniently delta-hedged. Losses are unlimited if USD/CNH trades below the 6.80 strike in one year.
14. CNY – escalating probability of free float: Buy 2yr USD-CNH call spread (7.80/8.40 strikes)
The probability of a free-floating RMB will likely rise steeply over the course of the next three years and become almost a nearcertainty by the end of 2019. We assign a 20% probability to a free float in 2017 but a 50% one if the US took major trade actions against China. In 2018, we see a 50% probability of a free float, rising to 80% by 2019. Selling topside optionality significantly reduces the cost of vanilla call options and the term premium is not high. Maximum leverage is close to 6x beyond 8.40 in two years and losses are capped at the premium paid.
15. Buy USD-SGD one-touch to position for EUR-USD parity
In 1Q17, we expect EUR/USD to break through the technical support at 1.05 and reach parity. If the pair does indeed test 1.00, USD/SGD should rise towards 1.50. The SGD has one of lowest implied vols in EM (3m implied volatility at 6.7%, against 10.0% for the EUR/USD), making it relatively cheap to express a directional USD view through options. Buy USD-SGD 3m one-touch knock-in 1.4950. The maximum leverage is 5x, while the maximum loss is the premium paid.
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1. Federal Reserve Policy Meeting
The latest Federal Reserve Open Market Committee (FOMC) policy decision is due on Wednesday December 14th at 14:00 EST.
Fed Chair Yellen will hold a press conference 30 minutes later.
As well as announcing the interest rate decision, the Federal Reserve will issue its latest economic projections and the individual interest rate projections by FOMC members.
Given the minutes from November’s meeting and the recent rhetoric from Fed officials, it will be a major surprise if the Fed Funds rate is not increased at this meeting and market expectations of a hike are close to 100%.
A majority of the committee wants to continue the process of policy normalisation and only a huge shock immediately ahead of the meeting will prevent a rate hike.
The ‘dot plots’ of rate forecasts by FOMC members will be very important as the market looks to gain some insight into the 2017 prospects. A further downgrading of medium-term projections would tend to trigger a downward adjustment of yield expectations, which would tend to undermine the dollar.
The overall tone of the statement will also be very important with a focus on commentary surrounding inflation and inflation expectations.
Rhetoric surrounding the dollar and international economy will also be an important focus. Any remarks on the implications of fiscal policy will also be watched closely.
There is likely to be unanimous decision to raise rates, although there is a small chance that there could be a dissent from one of the dovish members.
In her press conference, Yellen will be probed on the 2017 outlook and whether she could resign from the Fed although, as usual, there is likely to be little in the way of substance with Yellen steering away from political issues.
2. US Consumer Prices
The latest US consumer prices data will be released on Thursday December 16th at 08:30 EST.
Overall trends in US inflation will be very important for expectations surrounding the pace of further potential Fed tightening during 2017. The data will be particularly important given that earnings data in the December employment report was notably weaker than expected with a 0.1% decline cutting annual growth to 2.5% from 2.8%.
A strong rate of increase in prices, especially for the core rate, would increase pressure for a more aggressive Fed tightening, while a subdued reading would dampen expectations surrounding 2017 rate increases.
Trends in the energy and medical sectors are likely to have an important impact on the rate. Food prices will also be important after notably weak data over the past few months.
3. Bank of England Policy Decision
The latest Bank of England monetary policy decision will be announced on Thursday December 15th at 07:00 EST.
As well as the decision on interest rates and quantitative easing, the Monetary Policy Committee (MPC) will release the latest policy statement and minutes from the meeting.
At the previous meeting, the bank stated that it had a neutral bias and that there was no specific forward guidance with the bank ready to move in either direction depending on economic developments.
There have not been any major developments in the economy since the previous meeting. Near-term consumer spending has remained strong, although the industrial data has been disappointing.
Inflation also looks to be increasing at a slower pace than expected by the MPC. Overall, there is scope for a slightly dovish statement with the bank expecting the economy to slow during 2017 as higher inflation undermines spending. The bank is likely to maintain a neutral policy bias at this stage, but any commentary on forward guidance will be very important.
There are important data releases ahead of the MPC policy decision with the CPI inflation data on Tuesday, labour-market release on Wednesday and retail sales release on Thursday.
4. US Retail Sales
The latest US retail sales data will be released on Wednesday December 14th at 08:30 EST.
The impact of the retail sales data is likely to be lessened slightly by the fact that it comes out a few hours before the US Federal Reserve policy statement.
The data will, however, still have an important impact, especially as it will capture some of the consumer spending trends following the US presidential election.
The overall evidence suggests that consumer confidence has either held steady or improved after the election, especially with some relief that uncertainty has been eased. There was a notable increase in the December University of Michigan consumer confidence index.
Strong data would reinforce expectations that spending will accelerate early in 2017, while a relatively weak release would cast underlying doubts surrounding the outlook. Given the strong confidence surveys, markets are liable to be disappointed if there is an in-line reading.
The PPI data will be released at the same time as the retail sales data.
The New York Empire index and Philly Fed survey will both be released on Thursday and will provide some evidence on whether dollar strength over the past two months has started to have a negative impact on the manufacturing sector.
5. Swiss National Bank Policy Decision
The Swiss National Bank (SNB) will announce its latest policy decision on Thursday December 15th at 03:30 EST.
The most likely outcome is that the National Bank will hold policy steady once again at the latest meeting.
There are also likely to be further warnings that the bank will maintain negative interest rates and intervene where necessary to prevent even further currency over-valuation.
The SNB meeting does, however, come after the ECB and Federal Reserve policy decisions, which could trigger a shit in rhetoric with an outside chance that there will be a change in interest rates. In particular, the SNB will be uneasy over notably dovish ECB rhetoric and fresh declines in the Euro following this week’s Council meeting.
Any shift in rhetoric would have potentially important impact on the franc.
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Key events and releases for the week starting Dec 12th
1. Federal Reserve meeting
The Fed is widely expected to raise interest rates for the first time in a year and the second time in a decade at the conclusion of its policy meeting on Wednesday.
Investors are currently pricing in a 100% chance of a rate hike, according to federal funds futures tracked Investing.com's Fed Rate Monitor Tool.
The Fed is also expected to announce updated economic forecasts and markets will be watching for signals the outlook for inflation and the expected pace of rate hikes in 2017.
2. U.S. retail sales
The U.S. is to release data on retail sales at 08:30 ET on Wednesday, ahead of the Fed announcement later in the day.
Retail sales are forecast to have risen by 0.3% in November after a larger than expected 0.8% increase in October.
Consumer spending accounts for more than two-thirds of economic output in the U.S. and the holiday shopping season is the most crucial part of the year for many retailers’ profit margins.
3. Trump press conference
U.S. president-elect Donald Trump is scheduled to hold a press conference alongside his children in New York on Thursday to discuss what he described as his impending departure from his "great business" in order to fully focus on running the country.
Although Trump said during his campaign that he would turn over his business to his adult children, some of whom are business associates, he has yet to give specifics regarding when and how he plans to divest himself of his assets.
4. Euro zone PMIs
The euro zone is to release preliminary estimates on private sector business activity on Thursday.
Business activity in the euro area grew at the fastest pace in 2016 in November and Thursday’s data will show if political uncertainty has hit the modest economic recovery in the single currency bloc.
5. Bank of England meeting
The BoE is expected to keep interest rates on hold at record lows at its meeting on Thursday, particularly given the proximity to the Fed meeting.
Meanwhile, Tuesday’s UK inflation report is expected to show that the annual rate of inflation accelerated again in November, rising above 1% for the first time in two years.
The consumer price index is expected to have risen by 1.1% on a year-over-year basis as higher petrol prices and the steep drop in sterling feeds through.
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1. Bank of Japan Policy Meeting
The latest Bank of Japan policy decision is due on Tuesday 20th December. There is no fixed time, but likely to be around 22:00 EST Monday.
Bank Governor Kuroda will hold a press conference following the meeting. Again, there is no fixed time, but is likely to be around 3 hours after the policy decision.
The Bank of Japan faces a very different environment than those seen at the last few policy meetings.
The previous meeting came just ahead of the US Presidential election with USD/JPY trading around 104.00 with US 10-year bond yields around 1.80%.
The yen briefly surged following Trump’s US election victory, but has since declined sharply with USD/JPY trading above 118.00 and there has also been a surge in US yields with the 10-year yield at close to 2.60%.
These currency and yield trends will put a substantially different complexion on this monetary policy decision.
There is likely to be an upward revision to inflation forecasts, especially as oil prices have moved higher and the currency issues will certainly be much less pressing given the dollar’s sharp gains.
The Bank of Japan is committed to keeping long-term bond yields near zero in order to put upward pressure on inflation over the medium term and the bank will continue to buy government bonds in order to meet this objective.
Given the shift in circumstances, there is likely to be some speculation that the bank will look to adjust policy slightly and aim for a slightly higher level of long-term bond yields.
Any commentary on the yen will be watched closely with the bank likely to reinforce the need for underlying stability.
2. Fed Chair Yellen Speaks
Fed Chair Yellen is due to deliver a speech on the US job market on Monday December 19th at 13:30 EST.
Following the expected interest rate increase at the December FOMC meeting, the main market moving aspect was the increase in interest rate projections by the individual FOMC members with three rate increases expected for 2017 compared with the two expected at the September meeting.
The overall Fed statement was relatively cautious surrounding inflation, but the ‘dot plots’ received all the attention.
Markets will be looking at Yellen’s speech carefully to assess whether she looks to provide greater clarity on 2017 prospects.
The most important aspect of the speech will probably be comments on how close the US economy is to full employment and how much leeway the Fed has to try and push employment gains further without risking overheating in the economy.
Any references to the dollar will also be important for market sentiment.
3. US Durable Goods Orders
The latest US durable goods orders data will be released on Thursday December 22nd at 08:30 EST.
Investment spending will remain a crucial US economic factor over the next few months.
The Federal Reserve has been consistently uneasy surrounding capital spending levels in the economy, especially as this has dampened overall growth potential.
The recent durable goods orders data has shown some signs of a tentative improvement and markets will want to see if this evidence is continued.
The data will be for November, which does cover the post-election period, but it is unlikely that there will be a significant impact from the election result given the lags involved before decision making translates into actual spending.
Strong data would reinforce confidence in the US outlook.
The final Q3 US GDP data and jobless claims data will be released at the same time. The existing home sales data is due for release on Wednesday 21st with new home sales data on Friday 23rd.
4. Canada CPI Data
The latest Canadian CPI data will be released on Thursday December 22nd at 08:30 EST.
The Bank of Canada maintained a broadly neutral policy at the December policy meeting. The latest inflation data will be important in setting the underlying tone for the first quarter of 2017.
Canadian inflation has been slightly below the central bank target over the past few months, although the main effect has been from lower food prices, which may not be sustained over the medium term.
Weaker data would tend to push the central bank closer towards a further easing of monetary policy, while stronger than expected data would give the bank a strong incentive to wait for further evidence on domestic and international trends before making any decision to loosen policy further.
Governor Poloz appears slightly more optimistic over the outlook and a firm inflation reading would be likely to rule out a near-term monetary easing.
The retail sales data will be released at the same time with the latest GDP data due for release on Friday.
5. UK Current Account
The latest UK current account data will be released on Friday December 23rd at 04:30 EST.
The current account trends will continue to be watched very closely following the UK referendum vote to leave the EU.
There will also be big questions surrounding the data’s accuracy given that there were very big revisions to previous data.
The UK has persistently run a current account deficit and is, therefore, dependent on investment inflows to support the balance of payments position.
The decision to leave the EU will risk triggering a net deterioration in direct investment flows, especially with an important element of uncertainty surrounding the trade regime, which will be in place.
There will also be the risk that companies will relocate away from the UK, which would also undermine the balance of payments position.
In this environment, the UK will be more dependent on shorter-term and volatile capital inflows, which will also increase the risk that Sterling will weaken in order to attract sufficient capital inflows.
Any widening of the deficit would further erode long-term Sterling sentiment.