US Elections, General

Week Ahead: China forges ahead, Europe plays catch-up

George Walker, Friday, 4 December 2020

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The trading week begins with Import and Export data released from China, followed by German Industrial Production figures just ahead of European markets opening Monday. A relatively quiet day otherwise, until Japan’s Gross Domestic Product data in the evening.  Last time out, Japan’s GDP figures beat analysts’ expectations however, they still have a way to go for economic strength to return to pre-pandemic levels. If we see solid numbers released, could this justify the Bank of Japan’s current monetary policy and pave the way for potential tightening?

Unemployment data out of Switzerland precedes GDP and Employment Change data out of the Eurozone on Tuesday morning. As with most economies, GDP is a major focus for governments and central banks alike. Hopes of a vaccine have lifted expectations of a recovery however, with the trading bloc being made up of many separate nations, there are still turbulent periods ahead before optimism can return.

China continues its recovery

In the early hours of Wednesday morning we get important PPI and CPI inflation figures out from China. Inflation currently sits at around an 11-year low, mainly due to volatile food prices. The economy continues to recover, and expectations are that the People’s Bank of China could start to raise interest rates again in 2021. Hiking interest rates is a normal tactic to contain higher inflation so could a surprise result influence their decision-making?

Canada is prepared to do more

The Bank of Canada give us their latest stance on interest rates, as well as an accompanying rate statement. The BoC has dramatically cut their interest rates from 1.75% down to 0.25% to limit the damage to Canada’s economy. Previous comments from the central bank indicate that they are prepared to do more to boost the economy if needed, although no change is expected to the benchmark interest rate at this week’s meeting. Could their accompanying statement provide any clarity on forward guidance? It’s one to watch.

Thursday packs a punch

Thursday is the busiest of the week on the macro front as we start the first of a 2-day European Council Meeting. The importance of this is not to be underestimated as it will be attended by Heads of States. They’re expected to discuss rolling out the coronavirus vaccine, testing, and the gradual lifting of restrictions. Climate change and security are also hot topics on the agenda.

UK GDP is out before European markets open. The UK Chancellor painted a poor picture of the UK economy which will suffer its largest output fall in 300 years as GDP is expected to be down over 11% in 2020. The UK has been dramatically affected by the pandemic with lockdown restrictions causing unemployment levels to surge amid businesses being forced to shut their doors. Optimists will be looking for a sign of hope with better-than-expected data, which typically could be viewed as bullish for GBP, whereas a weaker number could be viewed as bearish.

Thursday’s headline event will be the Interest Rate Decision from the European Central Bank, followed by a policy statement and press conference. European economies have been some of the worst affected by the coronavirus, forcing the ECB into finding ways to better support the Eurozone’s economies. The dilemma they face is limited options as interest rates are already at rock bottom, thus Quantitative Easing (QE) has, until now, been their tool of choice.  Last time out, the ECB kept interest rates unchanged but did mention it was ready to increase its stimulus measure as the Eurozone faces a deep and potentially lengthy economic crisis. The press conference at 13:30 GMT is where traders and investors will be focused to see what the plans are going forward to help limit the damage to the economy and attempt to get back on the right track.

The USD could be in focus as we settle into Thursday afternoon when we see the latest Initial and Continuing Jobless Claims, as well as Consumer Price Index inflation data. Employment and inflation are two major points of consideration for the Federal Reserve when deciding on near-term monetary policy. Strong numbers on all fronts could see the USD strengthen as expectations of policy tightening could start to set in.

We finish the week on a quieter note with German CPI data and the Producer Price Index out of the US being the only notable releases.

Market remain volatile as traders look for further clarity on the rollout of a COVID-19 vaccine and any updates, positive or negative, could see exaggerated moves so traders will need to be mindful of risk controls and positions held overnight.

All times indicated are GMT.
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ECONOMIC CALENDAR (all times are GMT)

Monday, 7th December 

02:00 CNY Imports
02:00 CNY Exports
02:00 CNY Trade Balance
05:00 JPY Leading Economic Index Preliminary
05:00 JPY Coincident Index Preliminary
07:00 GER Industrial Production
09:30 EUR Sentix Investor Confidence
15:00 CAD Ivey Purchasing Managers Index
23:30 JPY Labour Cash Earnings
23:30 JPY Overall Household Spending
23:50 JPY Current Account
23:50 JPY Trade Balance – BOP
23:50 JPY Gross Domestic Product
23:50 JPY Gross Domestic Product Deflator
23:50 JPY Gross Domestic Product Annualised

UK Company Announcements:
Ted Baker

US Company Announcements: 
N/A

Tuesday, 8th December

00:30 AUD House Price Index
00:30 AUD National Australia Bank’s Business Confidence
00:30 AUD National Australia Bank’s Business Conditions
06:45 CHF Unemployment Rate
10:00 EUR Gross Domestic Product
10:00 EUR Employment Change
10:00 EUR ZEW Survey – Economic Sentiment
10:00 GER ZEW Survey – Economic Sentiment
10:00 GER ZEW Survey – Current Situation
13:30 USD Nonfarm Productivity
13:30 USD Unit Labour Costs
13:55 USD Redbook Index
21:30 USD API Weekly Crude Oil Stock
23:30 AUD Westpac Consumer Confidence
23:50 JPY Machinery Orders

UK Company Announcements:
Renew Holdings
Ashtead Group

US Company Announcements:
Brown Forman Corporation
Chewy Inc

Wednesday, 9th December 

01:30 CNY Consumer Price Index
01:30 CNY Producer Price Index
07:00 GER Imports
07:00 GER Exports
07:00 GER Trade Balance
07:00 GER Current Account
15:00 CAD BoC Interest Rate Decision
15:00 CAD BoC Rate Statement
15:30 USD EIA Weekly Crude Oil Stocks Change
23:50 JPY Producer Price Index

UK Company Announcements:
Stagecoach

US Company Announcements:
N/A

Thursday, 10th December

All Day – EUR European Council Meeting
00:00 AUD Consumer Inflation Expectations
07:00 GBP Industrial Production
07:00 GBP Manufacturing Production
07:00 GBP Goods Trade Balance
07:00 GBP Trade Balance non-EU
07:00 GBP Total Trade Balance
07:00 GBP Gross Domestic Product
12:45 EUR ECB Interest Rate Decision
12:45 EUR ECB Deposit Rate Decision
13:30 EUR ECB Monetary Policy Statement and Press Conference
13:30 USD Initial Jobless Claims
13:30 USD Continuing Jobless Claims
13:30 USD Consumer Price Index
13:30 USD Consumer Price Index ex Food & Energy
15:30 USD EIA Natural Gas Storage Change
19:00 USD Monthly Budget Statement
20:00 NZD REINZ House Price Index
21:30 NZD Business NZ PMI

UK Company Announcements:
Marstons
On The Beach
Smith (DS)
Ocado

US Company Announcements:
Costco Wholesale Corporation
Broadcom Inc
Lululemon Athletica

Friday, 11th December

All Day – EUR European Council Meeting
07:00 GER Consumer Price Index
07:00 GER Harmonised Index of Consumer Prices
09:30 GBP Consumer Inflation Expectations
13:30 USD Producer Price Index
13:30 USD Producer Price Index ex Food & Energy
15:00 USD Michigan Consumer Sentiment Preliminary
18:00 USD Baker Hughes US Oil Rig Count

UK Company Announcements:
Bellway

US Company Announcements:
N/A



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