Weekly Forex Outlook (December 4-8, 2017)
December 4, 2017

Weekly Forex Outlook of Dollar Index

Forex Outlook: 

It was predicted last week that the Q3 GDP would be announced above the market expectations and the same was observed as the annualized GDP for Q3 stood at 3.3% against the market expectations of 3.2%.

During last week politics completely overshadowed the economics. The tax reform bill observed some smooth progress through the Senate so far and is just a matter of time before it passes. However, there were reports towards the end of the week that Flynn was likely to testify against Trump that he asked him to contact the Russians and resulted in a whipsaw move in the dollar index and the market would be looking ahead towards any developments in the story.

In the week ahead, the focus would be again on the reconciliation of the House and Senate bill unless there are no new headlines associated with Russian probe.

The key economic release in terms of US Labor market report is scheduled to be announced on Friday. The market expects an addition of 188K jobs in the headline nonfarm payrolls which would be a downtick from October’s addition of 261K. In addition. The unemployment rate and the average hours worked are expected to hold steady at 4.1% and 34.4 respectively, but, the average hourly earning growth is expected to slow to 0.3% MoM from 0.5% during the previous release.

 

Weekly Forex Outlook of EUR/USD

 

Forex Outlook: 

It was predicted last week that 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.

During the week, the headline CPI numbers from Eurozone missed the market expectations of 1.6% and stood at 1.5% YoY and the core inflation also stood below the market expectations of 1.1% at 0.9%. However, the unemployment rate observed a surprise fall to 8.8% against the market expectations of 8.9%.

In addition, Merkel struggled to form a coalition government and there were reports during the week that she was in talks to form a grand coalition with Social Democrats but the same was denied by the leader of SPD party.

In the week ahead, with no major economic release from Euro-zone, the pair will be majorly driven by any new developments in the German coalition talks and the movement in dollar index

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Weekly Forex Outlook of USD/JPY

 

Forex Outlook: 

It was predicted last week that the pair will be driven by the happenings in the US and the same was observed as the tax reform bill observed some smooth progress through the Senate so far and is just a matter of time before it passes. However, there were reports towards the end of the week that Flynn was likely to testify against Trump that he asked him to contact the Russians and resulted in a whipsaw move in the pair.

In the week ahead, the secondary estimate of Q3 GDP is scheduled to be released on Friday; the preliminary reading came in at 0.3% QoQ, and 1.4% QoQ annualised. However, the pair is expected to be driven by the happenings in the US.

Weekly Forex Outlook of USD/CAD

Forex Outlook: 

All the gains observed in the pair were recovered on Friday on the back of the employment and the GDP data release from Canada. In 4 years, Canada observed the strongest period of job growth with more than 79k jobs added in the month of November. In addition, the part-time and full-time work increased which drove the unemployment rate to the lowest levels since February 2008. Even though the GDP growth slowed down in Q3, the strength of labor maker report and stronger than expected GDP growth added to the strength of the Canadian dollar.

In the week ahead, the focus will be on Bank of Canada’s interest rate decision on Wednesday wherein the market expects the Bank of leaving the interest rates unchanged.

The interest rate markets were pricing in a 40-50% chance of a hike at the upcoming decision, following the BoC’s back-to-back rate hikes in Q3 which has now fallen to 25% as the BoC has sounded more cautious in its recent public address and expects the economy to slow and stressing that the decision remains data driven.

 

Weekly Forex Outlook of GBP/USD

Forex Outlook:

The pair observed an upward rally during the week due to the positive news coming from both EU and UK Brexit negotiating teams with the ‘divorce bills’ seemingly agreed, even though the final figure is not yet known. In addition, the UK and EU citizen’s rights are also close to being signed off which leaves the Northern Ireland border issue to be solved before the talks could proceed towards the second phase.

In the week ahead, the week starts with the parliament debate on the withdrawal from the EU on Monday. In addition, UK PM May is expected to meet with EU Head Juncker and EU Chief Brexit Negotiator Barnier on Monday with the agenda more likely to be the financial settlement agreement and the commencement of trade talks.

In terms of economic data release, UK is scheduled to release the Services PMI on Tuesday which is expected to moderate to 55 from the previous release of 55.6 which was the fastest growth pace in services in six months owing to improved order books and resilient client demand.

Lastly, the production numbers for the month of October are scheduled to be released on Friday. The Manufacturing and Industrial production data are expected to observe an uptick in YoY readings and a fall in MoM readings. The data will coincide with the release of trade balance for the month of October which is expected to remain relatively stable at 11.5 bln.

However, the issue concerning Irish border remains a sticking point as recent reports state that Republic of and Northern Ireland has suggested that not enough progress has been made. In addition, the DUP remains focused on bringing down the DUP-backed Conservative government if May is unable to work out a feasible solution.

Weekly Forex Outlook of AUD/USD

Forex Outlook:

The pair was expected to be driven by the movement in the dollar index and the same was observed as the tax reform bill observed some smooth progress through the Senate so far and is just a matter of time before it passes. However, there were reports towards the end of the week that Flynn was likely to testify against Trump that he asked him to contact the Russians and resulted in a whipsaw move in the pair.

In the week ahead, the key event is the latest monetary policy decision by Reserve Bank of Australia on Tuesday wherein the market expects the interest rates to remain unchanged at 1.5%. The consumer confidence has fallen, housing activity has slowed, and inflation expectations have declined since the last meeting in November. In addition, the manufacturing activity and Business confidence improved on the back of higher iron-ore prices. It is expected that these improvements would encourage the RBA to maintain a neutral stance.

The release of Retail Sales data for the month of October is scheduled to be released on Tuesday wherein the market expects a rise of 0.3% MoM. Moreover, the release of Q3 GDP is expected on Wednesday wherein the market expects the QoQ data to fall to 0.7% against the previous release of 0.8%, while the YoY readings are expected to stand at 3% against the previous release of 1.8%.

Weekly Forex Outlook of USD/CHF

Forex Outlook: 

The pair will be driven by the happenings in the US and the same was observed as the tax reform bill observed some smooth progress through the Senate so far and is just a matter of time before it passes. However, there were reports towards the end of the week that Flynn was likely to testify against Trump that he asked him to contact the Russians and resulted in a whipsaw move in the pair.

In the week ahead, Switzerland is scheduled to release its inflation figures for the month of November on Wednesday wherein the market expects an uptick in the headline inflation figures at 1% against the previous release of 0.7%. In addition, the unemployment rate data is expected to be released on Thursday which is expected to remain in line with the previous release of 3.1%.

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

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