Dec 04, 2016 - Weekly Macro W49

After the weekend we will first see the results of the Italian referendum which may materialize in EUR selling or… EUR buying if voters would surprise the markets being rational this time. In the beginning of the week also European politicians will assess the progress of reforms in Greece. We also have the first central bank meetings of December scheduled (RBA, BoC and ECB) so we definitely won’t be bored at all… 

Weekend events: early Monday morning we will have the final results of two major European political events. The short term more important is Italy and the Constitution Amendment Referendum where the voters are not only voting for a simpler and more effective Italian political system, but de facto the faith of PM, Mario Renzi (and maybe the EU), who claimed earlier he would resign providing the referendum would not go through. This would mean new elections in which very likely the country’s rising populist, Eurosceptic party, the Five Star Movement would be the winner.The second event is the Austrian Presidential Election, where the results may have a longer term impact starting a new trend in European eladership. The voters in Austria may elect a president who would be the first far right president in Western Europe since the WWII. Norbert Hofer, the candidate of the far right Freedom Party of Austria lost to Alexander Van der Bellen, the leader of the Green party only by a thin margin. However, the result were annuled by the Consitutional Court on 1st of July due to election irregularities and this Sunday it is a repeated second round of the election. T

Next Week Macro

Monday: We start the week with two Services PMI, from China and UK. Both are expected to hold close to the previous levels well above the 50 points expansion threshold. During the day European politicians will discuss the Greek reforms and what’s the next step to save the troubled South European country. In the afternoon the ISM Non-Manufacturing PMI will shed some light on the post-election mood in the US Service Sector.

Tuesday:The main event of the Asian session will be the Australian Rate Decision which shouldn’t bring any surprise cut. After the change in the leadership at RBA, the new governor, Lowe is not a big fun of rate cuts or any QE. He will have to be eventually “forced” to cut rates by actions of other central banks (or by no action of politicians). In the afternoon we will see if there is any sign of change in the negative trend in the Canadian Trade Balance. In September the huge increase in exports came from one $2.9bil offshore oilrig module from South Korea and analysts expect that Trade balance deficit should have tightened in October. From US we have Productivity, Trade balance and Factory orders in the afternoon. The evening will be about API oil stock and New Zealand. RBNZ governor, Wheeler is scheduled to testify before the Finance Select Committee and the next GDT price index will be released too. The GDT index reached recently new highs after the historical bottom in August 2015. Further increase is expected and this is good news for the trade balance of the country which is one of the main problems of the economy.

Wednesday: We start with a key Aussie data, quarterly GDP. As most probably the rate decision will be a non-event on Tuesday, the GDP can move the market. The key sectors to watch are Construction (which is cooling down and will likely pull down the GDP figures) and Mining (strong rally in commodity prices is helping the sector to recover) which will most probably offset each other’s effect. We don’t expect the country can increase the pace of growth and it will most probably decline to or slightly below 3%. In the UK Manufacturing production we saw a surprise jump in November and analyst expect increase again, though smaller this time. The BoC rate decision is the next big event and it is not expected to cut the rates even during last meeting the policy makers discussed seriously this possibility.They decided to wait due to uncertainties and these reasons to be on hold are still in place. The risks increased after the US elections despite the increase in oil prices, being oil exploration a key sector of the country. The same time the US JOLTS Job openings will be also released and a modest growth is forecasted by the analysts. The EIA Crude Inventory report will be released later afternoon with a moderate increase expected. As yen crosses are currently driven by the USD mostly, the release of Japanese GDP is expected to have only a medium impact on the yen crosses.

Thursday: Two Trade balance figures will be released overnight. The first, Australian Trade balance, will have more local impact and as the Mining sector reviving further tightening of the trade deficit is expected. A surprise drop in Chinese Trade surplus in September was caused by a significant decline in exports. In October the economy didn’t manage to come back to the summer levels and now another drop is expected for November. The main event of the day is the ECB rate decision and while no major change or cut is expected, the press conference min later can give us a hint about the plans of the bank. There were rumors the last 2 months that ECB may start to taper its monetary expansion the next year which were however not confirmed yet. The Canadian Building permits may have a bigger impact than usually if the BoC the other day will not act due to the situation in housing market which is a key concern of policymakers.

Friday: Chinese inflation figures were pretty impressive last 2 months and again a more than 2% CPI and PPI is expected to be release on Friday. The recent depreciation of the Yuan and the awakening of fiscal policies around the globe should have a positive effect on the Chinese economy and this could push the price levels higher. During European morning the UK Goods Trade Balance could increase the volatility in the pound crosses. The trend is very negative as the deficit grew to almost a record 13bil pound recently despite the cheap pound which still didn’t manage to bring the expected positive effect on the trade balance of the country. The last data of the week will be the University of Michigan Consumer Sentiment index. Despite the unexpected jump last month it’s still in a negative trend though  economists expect a further increase which could mean a change in the downtrend trend in the consumers’ mood.

So as you can see, there will be plenty of events and opportunities to make some money as decent volatility is expected. But never forget 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. 

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