Trade and politics still crucial
US-China trade developments will remain extremely important during the week. Both sides, in public, remained committed to pushing to reach agreement on the phase-one deal, but there are major tensions. Existing tariffs will be a focus with a further increase in US tariffs on Chinese exports due to take place on December 15th. If the US insists that these increases will go ahead, risk appetite is liable to weaken with demand for the yen and Swiss franc.
The Hong Kong political situation will also be monitored closely, especially as US backing of civil rights has triggered tensions with China and is liable to have an impact on trade talks.
The congressional impeachment enquiry into President Trump will also continue to grab media attention, although the most likely outcome is that the market impact will again be very limited.
Thanksgiving will cut trading volumes
The US Thanksgiving Holiday will be held on Thursday with US markets closed which will cut trading volumes while activity will also be curbed on Wednesday and Friday. Trading ranges could narrow, but there will be the risk of currency spikes, especially on any major breaking news during the holiday period.
The latest consumer confidence data is due for release on Tuesday with the durable goods orders release on Wednesday. Revised third-quarter GDP data, Chicago PMI index and PCE prices data are also all due on Wednesday with releases bunched ahead of Thursday’s market holiday.
The overall impact of data is likely to be limited given no expectation that the Federal Reserve will sanction another interest rate cut at the December policy meeting.
There are no major economic data releases in the week ahead. There should be no announcement on the next Bank of England Governor until after the election, but there is the potential for leaks and any evidence of a dovish appointment would tend to weaken Sterling.
Political developments will remain dominant and Sterling will continue to gain an element of support if opinion polls continue to indicate a majority Conservative government is likely after the December 12th election.
The German IFO index is due for release on Monday and is likely to register a modest upturn in confidence.
Euro-zone CPI inflation data is due on Friday with the data likely to maintain expectations of very low ECB interest rates.
The Canadian GDP data is due on Friday. New Zealand business confidence data is due on Thursday and will have a significant impact on sentiment.
Chinese PMI business confidence data is due on Saturday. The release will be important for sentiment towards the Chinese and global economy.
Currency FX Forecast for Next Week
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