Good Monday All;
The AUD has continued to feel the full brunt of the USD resurgence following the US election. With the expectation of a US interest rate rise in mid-December at approximately 80% according to financial markets only last week, this is now progressing towards being almost fully factored in. The USD has gained over 5% against the AUD since the surprise election result with the speed of the AUD decline increasing in the latter part of last week coinciding with the announcement of key officeholders in the President-elect’s team.
The AUD will likely be at the whim of foreign markets this week and offshore trading with minimal local data due for release. The fall in the AUD is unlikely to have disappointed the RBA who will be pleased with the currency’s trajectory.
The APEC summit in Peru has closed with a declaration that working towards a free trade agreement amongst the 21 countries who signed it remains a top priority. This is in opposition to the stated objectives of the incoming US President-elect with the APEC members vowing to fight against moves towards protectionism.
There a number of key NZ data releases scheduled this week that will be eagerly watched with the recent RBNZ rate cut fresh in mind. Credit card spending, retail sales, visitor arrivals, producer price data and trade balance figures will all be released. It has emerged from the APEC summit that New Zealand is also very keen to update its trade agreement with China in order to re-balance the agreement with more recently signed pacts with other nations. The New Zealand/China agreement has been superceded in many ways with other nations receiving more favourable terms. Negotiations are expected to commence in the first half of 2017.
The US is gearing up towards the Thanksgiving Day holiday on Thursday (US time) with a huge focus on the following day’s Black Friday sales already underway. There is a large amount of data due for release ahead of the holiday starting with existing home sales and the Richmond Manufacturing Index. These measures are particularly interesting with both housing and manufacturing continuing to weigh on the US economy. New home sales data, unemployment and consumer sentiment and inflation expectations will all be released alongside the FOMC minutes on Thursday (Aust and NZ time). These minutes will be particularly interesting in light of the anticipated move at the December FOMC meeting.
ECB President Draghi is due to speak early in the week with markets looking for any sign of an intention to taper quantitative easing activities and the impact of negartive interest rates. It has emerged that negative interest rates have not served to reduce the savings rate across the region. The EUR is continuing to struggle with the USD surging. Key German data will be released this week alongside consumer confidence and a range of manufacturing and services PMI data.
In the UK this week the British government’s independent economic watchdog is expected to paint a gloomy picture for the country as it revises its previous forecasts for the economy. This will provide an interesting challenge for the new Chancellor Philip Hammond and his first autumn statement.
The APEC summit in Peru has also seen the emergence of comments from a Japanese government spokesman that Prime Minister Abe is keen to improve economic relations with China. These comments were favourably received by Chinese President Xi. It has been a busy week for Prime Minister Abe who stopped off in New York hastily to meet with US President-elect Trump.