27 Nov, 2016 - Weekly Macro Overview W48 (OPEC, Chinese PMIs, US and CA Employment and Italian Referendum)

The coming week will be data heavy with the OPEC production cut deal expected on Wednesday. On Sunday, the Italian Referendum regarding the reform of the government and the final round of the Austrian Presidential Election will take place. On the macro side we start the week with US GDP and PCE, later we will have plenty of US Labor market data including ADP, NFPs, Participation Rate and Average Earnings. Thursday will be full of PMIs, notably from China, GB and US.

Monday:

After Thanksgiving week the start will be on an easy note. Draghi will testify before European Parliament regarding the Brexit impact on EU. No major indicators are scheduled for Monday, except for the spending of Japanese households late night along with unemployment rate. There is no clear seasonal pattern we could use for our forecast spending, however in November data there was barely an increase. Unemployment is in steady downtrend since 2009.

Tuesday:

In the first half of the day we have German and Spanish CPI numbers. In the afternoon the second release of Q3 GDP (along with prelim quarterly PCE) from US that will get a lot of attention after the surprise rise in the Advanced data a month ago, which was the strongest data since 2014. Later the results of the Consumer survey by The Conference Board Inc. will be released which is always a closely watched data and it’s holding at high level around 95-100 pts for the last 2 years but still about 10-15 pts lower than the levels reached between 2005-2008. Kiwi traders should watch the Financial Stability Report of RBNZ followed by the governors’ speech in the evening.

Wednesday:

We will start the busiest day of the week with some Aussie data, most important Australian Business Confidence and from New Zealand the ANZ Business Confidence. The BoE will release its UK Financial Stability Report and the results of the UK Bank Stress Test. In the afternoon we have ADP employment as a leading indicator to NFPs on Friday and also the Core PCE price index will be released which is considered the inflation indicator of the Fed. Later the Canadian GDP can move the CAD as there will be low liquidity due to OPEC. Later afternoon the Chicago PMI, US Pending Home Sales and EIA Crude oil inventories will be worth of watching.

The OPEC agreement on production cut will be most likely announced in the evening so expect low liquidity during the day in crude futures and oil currencies (CAD, NOK) that will be followed by lots of volatility in the evening. A lot of “headline rumours” were released and will be released until the final announcement so be cautious with position sizing and stops. As Libya and Nigeria will not join the deal to cut production, Iran and Iraq will be the key players. If they can agree on some kind of production cut or freeze, there could be a deal. If one of them will not join the agreement at all, well the result will be no deal. The agreement is critical from different sides. If the deal is not reached, oil could tumble below 40$/bbl given the current supply glut and this would cause further difficulties not only for the OPEC members' budgets but non-OPEC producers as well. Additionally the trust in OPEC will be further diminished as the members were talking about the cut for 2 month now. On the other hand if they will agree on production cut there could be a more than $2 jump in oil prices but hardly can one expect a return above 60$.

Thursday:

The first data is the Australian Private Capital Expenditure which represents the growth of investments in private businesses. It will be followed shortly by the official Chinese Manufacturing and Services PMIs, so the AUD crosses will be very volatile in the beginning of the Asian session. Good Chinese numbers should support the AUD as higher commodity demand should help the Aussie economy maintain the relatively high growth rate. The UK manufacturing PMI will be released during the European morning and is expected to hold well above the 50 point level, however no major increase is forecasted. The US Jobless claims at the current strong Labour market conditions could only surprise negatively. The last 2 readings of ISM Manufacturing PMI were above 50 point recession level and any drop below 50 pts could raise doubt about the December Fed rate hike.

Friday:

The monthly growth of Aussie Retail Sales stabilized over the last 2 years between 0 and 0.7%, with only one time going slightly below 0. However the annual growth rate declined since 2014 from 5.5% to 2.6% in August. On the other hand, September brought the first increase in the last 9 month and the question is whether it can at least stay at this level. In the morning we have UK Construction PMI, an important sector survey in Britain as the Brexit concerns were related in a big part to this industry which is the main gate for capital inflow to the country. In the afternoon, the Canadian Labor Force Survey will be released with several key data as Employment, Unemployment rate and Productivity. At the same time the US Employment Situation Summary will be released by the Bureau of Labor Statistics. The key data from the report are NFPs, Average Earnings and Participation Rate. The Baker Hughes Oil Rig Count will be released at 18:00 and further increase is expected as during the fall the shale oil producers could hedge their production close to $56-57 for 2017 and around $60 for 2018. It may in turn mean that more wells in the US are profitable – an additional increase will be bad news for OPEC.

Remember to watch your risk and be consistent.

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. 

Contact: landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com