Nov 7, 2016 - Weekly Macro Overview W45

And we are finally here… yes, we reached the probably most important event of the year, the US Presidential Election. It is held on Tuesday 8th November and as the last week has shown this is currently the main market mover. We expect low liquidity and nervous trading ahead of the election and pretty high volatility afterwards (especially if Trump wins) so additional caution should be in place when placing orders.

The last week was mostly about the relaunched FBI investigation into Clintons emails and as she was losing preferences in polls, the US dollar was weakening against all major currencies. We had also 4 major central bank rate decisions but as we expected one week ahead the US election the policymakers decided to wait for the outcome. 

On the Economic data front the last week we had the following main figures:

Australia: as the building approvals fell on monthly bases by 8.7% it may indicate that the housing market is cooling down. This added to the strength of the Aussie dollar together with the decreased trade deficit. The gold price has broken the 1300 level which could help the mining industry which is one of the most important sectors of the country.

New Zealand: a flood of improving economic data came out last week starting with +11.4% in Dairy Price index from GDT auction, higher than expected increase in employment and an unexpected decline in Unemployment rate below 4.9%. The inflation expectations are unchanged on quarterly bases which supports the case of more stable benchmark rate. The advance of Kiwi was also supported by the overall weakness of the USD of course.

Japan: Retail sales continued to decline at higher than expected pace and prelim Industrial production was unchanged. Manufacturing BMI and Consumer confidence declined which signals more troubles ahead of the Economy

Europe: While the German retail sales declined unexpectedly, the following CPI and GDP data from the Eurozone was unchanged or in line with expectation. Later the week German and Spanich employment figures where better than expected

UK: The Brexit process got a hit by a ruling that that the government can’t trigger the Article 50 (formal beginning of exit process from the EU) without an approval from the parliament. Construction and Services PMIs where better than expected and the Manufacturing data was a little worse than estimated.

USA: We saw plenty of data mostly in line with expectations or little bit weaker. The worst were PMIs, especially Chicago PMI (strong industry) fell unexpectedly almost 4 full points which could indicate a weaker GDP in the future. On the other hand the average hourly earnings jumped 0.4% with an upside revision of the previous month from 0.2% to 0.3%.

Canada: here we had a downside revision of GDP and widening trade deficit with better than expected employment change. The oil inventories grow rapidly also which could have negative effect on the CAD in the coming weeks.

The upcoming week will be mainly about the US election and we prepared an article about the outcome and the implications here. Friday is a bank holiday in US so the week is a little shorter but more concentrated on the markets. On the data side we will have a soft week but you can still grab 30-50 pips.

Monday:

In the morning we have German Factory orders where little change is expected but given it’s a notoriously volatile indicator, only bigger surprise number will cause tradable moves. In the afternoon we have an interesting index which is worth to follow. This is the Labor Market Condition Index constructed by the Fed in 2014 based on 19 Labor market indicators. This was an attempt to give a full picture on the situation and even the market is not really reacting on this, it’s worth to follow as one of the Fed indicators.

Tuesday:

US Presidential Election Day, however, in the morning we will start with Chinese Trade balance, a very important figure related to the global macro picture. The expectations are high but remember the last time, the weak export figures caused quite a sell-off in risk assets and at the current nervousness due to US high volatility is expected around these numbers. Polling stations open at GMT 11:00 in the east cost states. In the afternoon we have US JOLTS Job openings and after the last month surprise decline in the number of open positions the consensus forecast is in the middle of the previous month’s figures. In the evening we have also API oil stock which jumped more than 9 mil barrels last week.

Wednesday:

The day after? … Well, not exactly as during the Asian session the first state projections will be made after GMT 00:00 AM, when the first polls start to close. Meantime on the other side of the Pacific, Chinese inflation figures will be released. Both CPI and PPI surprised to the upside last months. The increasing wages in China are creating a significant buying power which are supportive to the inflation of course. On the other hand the process will lead to more expensive exports which is not only a Chinese but also a Global risk. The earliest time to estimate the winner of the Presidential Election is around GMT 04:00. We have rate decision in New Zealand and a 25 basis point cut is forecasted by most of the analysts. Well, personally I think it would be a mistake. This economy is currently in the best shape among the countries I’m following and probably the best advice currently would be “Don’t touch it!”… at least not through Monetary policy but via reforms. I know there is only one year to the next elections hence it’s unrealistic to think about it. But reforms with other words adjusting the rules of the game to the changing environment is a must for any government.

Thursday:

The morning will be without any important data. The afternoon starts with the Canadian house price index as a key sector showing signs of overheating. After the surprise jump in home prices in the summer now the crowd expects a return back to the average pace of price increase. The same time US unemployment claims will be released and after a surprise rise last month a stabilisation is expected, so more or less no change. You know, I don’t really mention here speeches, but after the Presidential election it will be interesting how the FOMC members will react, and Bullard will be the first to give some hints how they see the developments.

Friday:

It will be a bank holiday in the US and only Stanley Fishers speech and the University of Michigan Consumer Sentiment should add to the volatility as the main topic of the year will be over on Thursday, and the market will be digesting the results. Later afternoon BOC Governors speech could cause some isolated movements in CAD crosses too. 

You can sign up for our Live Trading Room here, the schedule is below:
Tuesday: GMT 09:00 AM
Wednesday: GMT 01:00 PM 

Good luck and remember to watch zour risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading teams view on past and current economic and capital market environment. It is not and shouldn´t been viewed as an investment advice and the creator of this material shouldn´t be held liable for any loss resulting from action where despite this disclaimer someone would consider this  material  as an investment advice.

All rights reserved ©2016 www.landoftrading.com, contact: landoftradingATgmail.com