Key Points From This Week

Mixed US Data

The first set of headline US data disappointed this week with both the ISM Manufacturing & Non-Manufacturing readings coming in short of market forecasts. The manufacturing reading was particularly worrying, showing that the US factory sector remain in contractionary territory for a fourth consecutive month over November. While non-manufacturing was at least on the right side of the 50 level, it was still below the projected reading. Together, the two readings have raised questions over US Q4 growth.

However, on Friday US labour market data came in firmly above expectations. The NFPS printed 266k vs 181k expected, with the unemployment rate ticking down to 3.5% from 3.6% prior. Average hourly earnings were a little softer, at 0.2% vs 0.3% expected though, in all, the data should be enough to keep the Fed away from any further easing at this stage.

Lagarde Says ECB committed to Inflation Target

Lagarde made her first testimony before European parliament this week as head of the ECB. In her comments, Lagarde said that the ECB remains “resolute” in its determination to bring inflation back to 2% and noted that downside risks threatening the Eurozone were persistent. The comments have further increased the market expectation that the ECB will be forced to ease again in the near future.

Trade Deal Uncertainty Deepens

The US-Sino trade deal landscape has become increasingly difficult to navigate recently and conflicting comments and headlines have started to feed through into unsteady price movements. Global equities benchmarks were knocked lower this week as China retaliated against the US backing of a bill supporting the Hong Kong protestors by cancelling a planned US military visit and threatening to ban US diplomats from entering the country. Tensions subsided over the week, however and reports returned to highlighting that the two countries are still on track to agree a trade deal. However, with Trump saying that a deal might be delayed until after the Presidential elections next year, uncertainty continues.

RBA & BOC Remain on Hold

Both the RBA & BOC caught investors off-side this week with more positive outlooks on their respective economies. Despite noted downside risks, both banks were expected to keep rates on hold. However, the optimism from each central bank was not prices in and both the Australian and Canadian Dollar were higher consequently.

Key Events Next Week

December FOMC Meeting

While the Federal Reserve is not expected to cut rates further this year, in light of ongoing weakness in key US economic readings, the policy statement will likely have a dovish tone to it. The Fed noted last time around that any further weakness in the economy could see the bank return to easing. With this in mind, the Fed is likely to reiterate this message, keeping easing expectations for Q1 elevated.

UK General Elections

The UK general elections next week will have vital implications for Brexit and as such, the British Pound. Polls consistently highlight the Conservative party in the lead though without an overall majority. Consequently, another hung parliament seems the most likely outcome which will likely be seen as increasing the chances of a further Brexit delay.

December ECB Meeting

Christina Lagarde will chair her first ECB meeting next week and the market is eagerly awaiting the outcome of her review. While no further easing is expected at this stage, investors so expect the ECB to reiterate its recent message, keeping the prospect of further easing alive.

OPEC Agrees To Deeper Cuts

The December OPEC+ meeting, between OPEC and a group of non-OPEC producer-nations led by Russia, saw the group agreeing to increase production cuts from 1.2 million barrels per day to 1.7 million barrels per day. The cuts are due to run until end of Q1 2020, though this could be extended if necessary. While the move will likely be bullish for oil in the medium-to-long term, current attention on US-Sino trade relations has seen a muted response so far.

Keep An Eye On

US-Sino Trade Deal Headlines

With the December 15th date fast approaching, the US is facing a big decision. If a deal is not done, Trump will have to decide whether to postpone the next round of tariffs scheduled for that date, or push ahead with them. New tariffs risk threatening the trade negotiations and could see retaliation from China, which would be risk negative for currency and asset prices.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% and 71% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.