The New Zealand dollar emerged at the top as the best performing currency last week. The gains came as the NZD erased the losses from the week before.
Similar gains were seen in the AUD currency as well as it gained 1.13% and reversed the declines from the week before.
The CAD and the NOK, both oil correlated currencies closed weaker. The CAD was down 0.49% while the NOK managed to fare slightly better, closing with 0.06% declines. Both the currencies remain bearish at the moment.
The EUR currency was down 0.19% on the week. The common currency remains broadly subdued and no match for the U.S. dollar’s strength.
Although Brexit news was relatively quiet last week, the GBP was seen to extend losses by 0.58%. The GBP was the worst performing currency as it continues to be battered by the Brexit news.
Both JPY and the CHF currencies, considered to be safe haven were seen trading on the backfoot. This indicated the market risk appetite last week. The JPY was down 0.49% while the CHF was down 0.18% on the week, extending declines for the past two weeks.
Market Highlights – Last Week
New Zealand retail sales
New Zealand’s third quarter retail sales showed that retail spending was weaker than expected in the September quarter.
While increases in petrol prices pushed up spending on fuel, this crowded out spending in other areas, leaving the overall volume of retail spending flat for the quarter (compared to analysts’ forecasts for a 1% rise).
There was a modest gain in core (ex-fuel and motor vehicle) categories. Core retail sales increased 0.4% which was below forecasts of a 1.5% increase.
Japan Manufacturing Sector
The manufacturing sector in Japan continued to expand in November, albeit at a slower pace, the latest survey from Nikkei showed on Monday with a preliminary manufacturing PMI score of 51.8.
That’s down from the six-month high score of 52.9 in October, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.
Individually, new orders, backlogs, stocks of purchases and stocks of finished goods all contracted in November.
Output, new export orders, employment, output prices, input prices and quantity of purchases all continued to expand.
Personal-consumption expenditures, a measure of household spending, increased a seasonally adjusted 0.6% in October from the prior month, the Commerce Department said Thursday.
That was the largest monthly increase since March.
Personal income, reflecting Americans’ pretax earnings from wages, salaries and investments, rose 0.5% in October, the best gain since January.
Both measures overshot economists’ expectations.
Inflation in Germany
Inflation in Germany eased in November amid abating inflation rates in the food and services categories, the Federal Statistical Office said Thursday.
Germany’s annual inflation rate–measured by harmonized European Union standards-fell to 2.2% from 2.4% in October, according to a preliminary estimate.
Economists polled by The Wall Street Journal had forecast a rate of 2.3% in November.
While inflation in the energy sector remained rampant–energy prices in Germany jumped 9.3% from November last year–annual inflation rates slipped in the food and services categories to 1.4% and 1.5% respectively in November.
Switzerland posted an unexpected 0.2% quarterly drop in GDP last quarter, versus expectations for a slight rise.
The year-on-year growth rate was 2.4%, below expectations for a 2.7% rise.
Last quarter’s weakness was in part due to one-time factors, like sports license fees, that lifted first-half growth and weren’t repeated.
Exports also weighed on growth.
With the trade surplus already growing again in October and consumer fundamentals still strong, look for GDP to recover in the fourth quarter.
Economic Events – The week ahead
UK PMI data
Economic data from the UK this week will see the release of the manufacturing, services and construction PMI.
The UK’s economy was seen faring somewhat better in the third quarter.
However, economists note that growth could be hit in the fourth quarter.
The PMI’s cover the month of November and could potentially signal how the economy fared. In October, PMI’s were relatively subdued.
RBA monetary policy meeting
The Reserve Bank of Australia will kick off the new month with its monetary policy meeting.
No changes are expected from the RBA as the interest rate remains unchanged at 1.50%.
The central bank’s meeting comes amid recent economic data which showed a pick up in the labor market.
This is expected to eventually tighten wages which in turn could push inflation higher.
Later in the week, the quarterly GDP report from Australia will be coming out, followed by the retail sales report.
Bank of Canada Monetary Policy Meeting
The Bank of Canada will be holding its monetary policy meeting this week.
The central bank is expected to keep its monetary policy changed at this week’s meeting.
The decision comes amid a weaker pace of growth that was registered in the third quarter of the year.
US ISM’s manufacturing and non-manufacturing PMI
A busy week for the U.S. dollar will see the release of the ISM’s manufacturing and non-manufacturing PMI.
This is later followed by ADP’s private payroll numbers and later, the official payrolls reports.
The data covers the month of November and the Fed will be closely watching the figures ahead of the proposed December rate hike.
Europe monthly manufacturing and services PMI
The Eurozone will see the monthly manufacturing and services PMI coming out.
Flash inflation estimates pointed to another month of weaker activity across the sectors.
This could potentially dent the sentiment in the euro as the ECB prepares to exit from its massive bond purchase program in December.
Technical Trading Idea of the week
Gold price was a bit volatile last week. The volatility came amid the comments from the Fed Chair Jerome Powell.
In a speech at the Economic club in New York, the Fed Chair said that the Fed funds rates were near the neutral level.
This led the markets to interpret that the Fed could signal a slower pace of rate hikes in the coming year.
However, expectations are firm that the Fed will hike rates once more in December.
From a technical standpoint, gold prices got a brief boost from the dovish comments.
However, gold price eased back giving up most of the gains.
Price action on the weekly chart is set to form a doji for the second consecutive week.
However, we expect that the bias will remain to the upside.
Gold will need to clear the main resistance level of 1242.25 in order to confirm the upside.
In the event that gold manages to edge higher, the next target is 1280.
To the downside, watch for a potential risk of a decline to 1204 level.
This support level which is untested could be a prime target to establish support.
Meanwhile, the week ahead will see fresh economic reports.
Any signs of slowdown in the U.S. economy could potentially boost gold prices higher as speculation turns to the number of rate hikes the Fed will deliver.