Weekly Outlook of Financial Markets for December 16-20

The financial markets remain poised for the upcoming FOMC meeting, in which it will be decided whether the FOMC would announce of tapering QE3. The current expectations from analysts are that the Fed is likely to do so and start cutting down on its pace of asset purchase program. Besides the highly anticipated FOMC meeting, several reports, decisions and speeches will take place this week including: Bernanke’s speech, minutes of the FOMC meeting, U.S CPI, German Ifo business climate, U.S existing home sales, Japan’s trade balance, BOE governor Carney speaks, U.S GDP for the third quarter, RBA’s governor’s speech, RBA’s minutes of monetary policy meeting, GB climate count, Euro group summits, MPC rate vote, China, Germany and France’s manufacturing PMI reports, Philly fed index, Canada’s retail sales, ECB President’s speech, and U.S. jobless claims.  Here is an economic outlook for the week of December 16th to December 20th regarding the U.S, Euro Area, GB, Canada, China, Japan, Australia and Great Britain.   

(All times GMT):

Monday, December 16th

02:45 – China Manufacturing PMI (flash): HSBC will release its flash manufacturing PMI survey for December. Last month’s report regarding November 2013 the Manufacturing PMI declined to 50.4 – i.e. China’s manufacturing sectors is growing but at a slightly slower rate. If in the upcoming update the PMI index continues to fall, it could signal the progress in China’s economy is slowing down. This may also affect commodities prices;

09:00 – Flash German, French and Euro Zone Manufacturing PMI: In the previous monthly report regarding November 2013, the Germany’s PMI rose to 52.5 i.e. the manufacturing conditions are growing at a slightly faster pace. France’s PMI fell to 47.8. This report serves signals to the developments in the Euro Area’s manufacturing conditions; this news, in turn, may affect the Euro/USD currency pair and consequently commodities prices;

14:00 – Draghi’s Testimony: ECB President will testify on monetary policy before the European Parliament’s Committee on Economic and Monetary Affairs, in Brussels;

14:00 – U.S. TIC Long Term Purchases: The Treasury International Capital monthly update will show the changes the purchases and sales of US long term treasuries for October 2013. In the recent report regarding September 2013, the net foreign sales of U.S Treasuries longer-term notes reached a surplus of $25.5 billion;

14:15 –U.S Industrial Production: This report will show the monthly changes in the industrial production as of November; as of October, the production slipped by 0.1%; this report may affect the USD currency;

Tuesday, December 17th

00:30 – Minutes of Reserve Bank of Australia’s Monetary Policy Meeting: The Reserve Bank of Australia left its interest rate unchanged at 2.50%; the minutes of the recent monetary policy meeting may offer some insight behind its recent decision; this news may affect the Australian dollar and consequently commodities rates;

09:30 – GB CPI (November 2013): In the previous monthly update regarding October 2013, the CPI fell to an annual rate of 2.2%; if the inflation rate continues its downward trend, it may eventually affect the BOE’s monetary policy;

10:00 – German ZEW economic sentiment: The forthcoming report will refer to the ZEW indicator of economic sentiment for Germany for November. In October, the ZEW indicator for Germany rose to 54.6 points; if Germany’s economic sentiment continues to rise, the Euro will plausibly strengthen against other currencies including the US dollar;

10:00 – Euro Area CPI: Based on the recent report, the annual CPI declined to 0.7%, which is well below ECB’s target inflation; if the inflation continues to decline, it could affect ECB’s monetary policy;

All Day – Euro-Group Summits: The summit will be held in Brussels; the EU ministers of finance and Euro-Group President may refer to the latest developments in Europe;

13:30 – Canada Manufacturing Sales (October 2013): This report will pertain to the manufacturing sales in Canada as of October. It may affect the USD/CAD currencies pair, which is correlated with commodities. In the previous report regarding September 2013, manufacturing sales rose by 0.6%;

13:30 – U.S Core Consumer Price Index: This monthly report refers to the main changes in the core consumer price index for November 2013. According to the U.S Bureau of Labor statistics, during October, the CPI inched down by 0.1% (month-over-month); the core CPI inched up again by 0.1%; this report could affect the USD and may also affect the FOMC’s monetary policy;

15:30 –BOE Governor Carney Testifies: Governor Carney will testify before the House of Lords Economic Affairs Committee, in London;

21:30 –Governor Stevens speaks: Reserve Bank of Australia Governor is due to testify before the House of Representatives Standing Committee on Economics, in Canberra; this speech may affect the Aussie dollar;

23:50 – Japanese Trade balance: Back in October 2013 the Japanese trade balance deficit slightly contracted to 1,071 billion yen (roughly $10.4 billion) deficit (seasonally adjusted figures). Japan is among the leading importers of commodities, including crude oil and gold; its trade balance could offer information vis-à-vis Japan’s changes in demand for goods and services;

Wednesday, December 18th

09:00 – German Ifo Business Climate Index: This index comprises of the developments (on a monthly basis) in the manufacturers, builders, wholesalers, and retailers in Germany as of December. In the last report regarding November 2013, the business climate index rose to 109.3 in October;

09:30 – Great Britain Claimant Count Change: As of previous month, the number of unemployed in GB fell again by 41.7k; the rate of unemployment inched down to 7.6%;

09:30 –MPC Asset Purchase and Rate Votes: In the past MPC meeting, the Bank kept the rate unchanged at 0.5% and the asset purchase program at £375 billion; this vote count will show how many MPC members voted on any changes to the asset purchase program or interest rate;

All Day – ECOFIN Summit: The EU ministers of finance will meet and talk about the recent economic developments in EU;

13:30 – U.S. Housing Starts: The U.S Census Bureau will publish its U.S housing starts monthly update for October 2013; this report was historically correlated with gold price – as housing starts rise, gold tends to fall the next day (even when controlling to the U.S dollar effect); in the past report the housing starts data weren’t released;

13:30 – U.S. Building Permits: In the previous update, during October, building permits rose by 6.2% (m-o-m) as the adjusted annual rate of building permits reached 1.034,000. If building permits continue to rise, it may indicate that the U.S housing market is reheating (the recent U.S building permits update);

15:30 – U.S Crude Oil Stockpiles Weekly update: The EIA (Energy Information Administration) will release its weekly report on the U.S oil and petroleum stockpiles for the week ending on December 14th;

19:00 – FOMC Meeting and Press Conference: The highly anticipated final FOMC meeting for this year will take place during December 17th and 18th. The FOMC will decide whether it will start tapering QE3. Many analysts expect the FOMC will announce the tapering of its long term treasury bonds purchase program by $15 billion a month. In such an event, the total asset purchase program, in this case, would remain at $70 billion a month. Considering the little effect the treasury bonds purchase program has had on the economy and the slow progress of the labor market, the FOMC might decide to take different measures to stimulate the economy, such as raising the inflation target, increasing the mortgage backed securities purchase program, or pegging the long term interest rates (10 years) at 2.5%. If the Fed reduces QE3, it is might pull up USD and drag down (for a short period) gold and silver prices. If the Fed won’t introduce any changes to its monetary policy, gold and silver prices might bounce back. In any case, the FOMC’s statement, outlook and press conference that follow are likely to move the forex, stocks and commodities markets;

Thursday, December 19th

09:00 – Euro Area Current Account: In the previous report, the gap in value between imported and exported goods, services, income flows, and unilateral transfers shrunk to 13.7 billion Euros. This report could also indicate the recent developments in the progress of the EU economy;

09:30 – Great Britain Retail Sales: In the last month, retail sales in Great Britain fell by 0.7%; this report could affect the British pound;

13:30 – U.S. Jobless Claims Weekly Report:  This weekly update will pertain to the changes in the initial jobless claims for the week ending on December 14th; in the recent report the jobless claims sharply rose by 68k to reach 368k; the next weekly report may affect the U.S dollar and consequently commodities and equities markets;

15:00 – U.S. Existing Home Sales: This report will show the shifts in U.S. existing home sales during November 2013; in the last report regarding October 2013 the number of homes sold fell to a seasonally adjusted annual rate of 5.12 million houses; if this trend persists, it might adversely affect the U.S dollar;

15:00 – Philly Fed Manufacturing Index: This monthly survey estimates the growth of the US manufacturing sectors. In the last survey regarding November, the growth rate fell from +19.8 in October to +6.5 in November. If the index continues to fall, it may adversely affect not only U.S Dollar but also U.S equity markets and commodities (the recent Philly Fed review);

15:30 – EIA U.S. Natural Gas Storage: The EIA weekly report of the U.S. natural gas market will pertain to the recent developments in natural gas production, storage, consumption and rates as of December 14th;

Friday, December 20th

09:30 – GB Current Account: This quarterly report will show any changes in the gap between the impost and exports as of the recent quarter. Based on the latest update, the deficit contracted to 13 billion pounds.  This report might affect the direction of the British Pound;

13:30 – Canada Core CPI: In the previous report, manufacturing sales rose by 0.2%;

13:30 – Canada Core Retail Sales (October 2013): This report will refer to the manufacturing sales in Canada as of October. It may affect the USD/CAD currencies pair, which is strongly correlated with commodities. In the previous report regarding September 2013, manufacturing sales remained unchanged;

13:30 – Final U.S GDP 3Q 2013 Estimate: This will be the last estimate of U.S’s third quarter 2013 real GDP growth. In the previous estimate the U.S GDP rose by 3.6% in the third quarter of 2013. If the growth rate were to be revised up again, this might positively affect not only the US dollar but also commodities prices;

Tentative – Japan’s monetary policy meeting and press conference: In the next Japanese monetary policy meeting, BOJ members will announce of any changes to the bank’s current asset purchase program. This decision may affect the Japanese yen;

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