Forex Weekly Outlook (Nov 27th – Dec 1st)
November 27, 2017

Weekly Forex Outlook of Dollar Index

Forex Outlook: 

 It was predicted last week that the US durable goods orders would come in at 0.4%. However, the Dollar Index was weak owing to Thanksgiving break and the US Durable Goods missed estimates after a strong three-month run. The measure that strips out volatile components from the New Orders had its biggest drop since September 2016. Also, FOMC minutes stated that many viewed a near-term hike was warranted, but that concerns regarding inflation were also widely shared with “some” participants were against endorsing a December hike given the weakness in inflation.

For the last week, the Dollar Index was down 0.93%, its third consecutive weekly decline.

In the week ahead, Fed Chair, Janet Yellen is due to testify in Congress on Wednesday and, the eight members of the rate-setting committee are scheduled to speak during the week. Moreover, the Senate is expected to back from the recess and the market would be looking ahead towards any progress in tax reform bill.

In addition, US is scheduled to release its second Q3 GDP estimate on Wednesday. According to our predictions, which is based on a regression model, the Q3 GDP is expected to be 2.3% above the market expectations of 2.2%. On Thursday, the latest personal spending and income data are expected to be released. Personal spending is expected to have risen by 0.2% MoM whereas the personal income is expected to have risen by 0.3% MoM in the month of October.

Weekly Forex Outlook of EUR/USD

 

Forex Outlook: 

During the weekend, German Chancellor, Merkel failed to form a coalition as the weekend full of negotiations was inconclusive which resulted in a partial weakness in the pair. However, there were reports of a German grand coalition during the week.

Moreover, the manufacturing PMI of Germany stood at 62.5 against the market expectations of 60.4. At the same time, the French Manufacturing PMI observed an uptick to 57.5 against the market expectations of 55.9 during the month of November which garnered strength in the pair.

In the week ahead, Germany is scheduled to release its inflation numbers for the month of November on Wednesday. which is expected to observe an uptick of 0.3% against the previous release of 0.0%. In addition, unemployment change data for Germany is expected to be released on Thursday wherein a drop of 10k is expected.

Lastly, Eurozone is scheduled to release its flash CPI figures on Thursday wherein the headline inflation figures are expected to observe a rise of 1.6% against the previous release of 1.4%.

However, our analyses state apart from the economic data release, the major focus will be on the political developments in Germany as striking a Grand Coalition deal will not be an easy task.

Weekly Forex Outlook of USD/JPY

 

Forex Outlook: 

It was predicted last week that with no tier-one data release from Japan and the pair is expected to be dominated by the events in the US.

During the week, the pair undertook weakness from dollar index as there was no significant headway in the Republican-led effort to pass tax cut legislation. In addition, the November FOMC meeting minutes hinted that the policymakers were worried about the lack luster growth in price and many observed that weak inflation could prove persistent and may reflect a drop in inflation expectations.

 In the week ahead, the headline CPI for the month of October is expected to print at 0.8% and the job-to-applicant ratio is seen nudging up to 1.53 from 1.52, while the labour market is expected to show a steady 2.8% unemployment rate. However, the pair is expected to be driven by the happenings in the US.

Weekly Forex Outlook of USD/CAD

Forex Outlook: 

It was predicted that the pair was expected to be driven by the movement in the dollar index. The pair observed weakness during the week on the back of dollar weakness and was able to bounce off from its lows due to softer than expected retail sales report from Canada.

There was a 0.1% rise in consumer spending in the month of September which was quite weaker than the market expectation of 1% rise. In addition, there was no progress observed in the latest NAFTA negotiation talks.

In the week ahead, the market would be looking towards the BoC’s Financial System Review on Tuesday and the focus will be on how conditions have proceeded after the two rate hikes in Q3. BoC governor, Poloz will deliver a press conference after the release of the report, which is the last scheduled appearance by a BoC policymaker ahead of the December monetary policy decision.

On Friday, the Q3 GDP is scheduled to release wherein the market expects an annualized growth of 1.6% QoQ lower than the Q2 growth of 4.5% on the back of weak exports and consumer spending.

Moreover, OPEC and non-OPEC oil ministers will convene on 30th November for the 173rd OPEC and 3rd non-OPEC ministerial meeting. The market expects for the current output pact, which is to expire in March 2018, to be extended by 9-months according to the recent source reports.

Lastly, the Canadian labor market report is scheduled to release on Friday wherein the market expects 10k addition in the payroll which is lower than its previous addition of 35.3K in October.

 

Weekly Forex Outlook of GBP/USD

Forex Outlook:

EU ministers were scheduled to meet to assess the Brexit negotiations and the plausibility of progress in December and Brussels-based ambassadors were scheduled to meet to discuss internal preparations for any potential transition agreement.

During the week, the pair observed strength on the back of the reports that PM May was expected to raise the Brexit-bill offer but the same was not announced. However, Ireland’s border issue turned out to be a hurdle towards advancement in the Brexit talks. Moreover, the Office of Budget Responsibility lowered its 2017 to 2020 GDP forecasts, but weakness in the U.S. dollar helped to contain the losses in the pair.

In the week ahead, UK is scheduled to release Bank Stress Test results on Tuesday. In addition, the Manufacturing PMI for the month of November is scheduled to release on Friday wherein the market expects an uptick to 56.5 against the previous release of 56.3 during the month of October.

Survey collators IHS-Markit noted that “UK manufacturing made an impressive start to the final quarter of 2017 as increased inflows of new work encouraged firms to ramp up production once again. The sector looks to be achieving a quarterly rate of expansion close to 1%, therefore sustaining the solid pace of growth signalled by the official ONS estimate for the third quarter. The continued robust health of manufacturing and rising price pressures will help cement expectations of the Bank of England hiking interest rates for the first time in a decade as Thursday’s announcement approaches.”

The political uncertainty in Ireland wherein the opposition party said it might call for a ‘no confidence’ vote in the incumbent government over the recent political scandal, which could cause further delays in the Brexit talks.

Weekly Forex Outlook of AUD/USD

Forex Outlook:

During the week, the RBA meeting minutes were less encouraging since the focus revolved around the uncertainty around weaker consumption and wage pressures, but the report was shrugged off after the comments from Governor Lowe that it is more likely that the next move in interest rates would be up rather than down.

In the week ahead, China is scheduled to release its official PMI numbers on Thursday wherein the Manufacturing PMI is expected to come in at 51.5 against the previous release of 51.6.

With no major economic data release from Australia during the week, the pair is expected to be driven by the movement in the dollar index.

Weekly Forex Outlook of USD/CHF

Forex Outlook: 

It was predicted last week that with no tier-one data release from Japan and the pair is expected to be dominated by the events in the US. During the week, the pair undertook weakness from dollar index as there was no significant headway in the Republican-led effort to pass tax cut legislation.

In addition, Swiss National Bank Chairman Thomas Jordan said the SNB’s action is “necessary response to excessive upward pressure on the Swiss franc due to its perceived safe-haven status and is intended to ensure price stability.”

In the week ahead, Switzerland is scheduled to release Q3 GDP figures on Thursday wherein the QoQ figure is expected to observe an increase of 0.6% against the previous release of 0.3%. Moreover, the retail sales data which is to be released on the same day is expected to observe a rise of 0.3% YoY in the month of October against its previous release of -0.4%. 

However, the pair is expected to be driven by the happenings in the US.

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