It’s another busy week for economic data, with some key indicators in the domestic calendar that could influence the Fed ahead of its December rate meeting, while rate decisions from the Bank of Canada and the European Central Bank occur in the next few days.
By Peter Martin
Monday, November 30, 2015
It is expectations regarding the divergence of US monetary policy with the other major central banks that has been driving dollar strength, a trend we saw continued in some small degree on Monday morning, with the dollar index touching its highest level since March. The balance of expectations seems to lean toward a Fed hike at the FOMC meeting on Wednesday December 16, while ECB President Mario Draghi has laid heavy hints that we could see further stimulus measures from the ECB this Thursday, following the latest meeting of its governing council. Euro losses against the dollar were capped this morning by a surprise rise in German inflation though — the preliminary reading for November’s German CPI was up 0.1%, versus expectations for no change, which edges the annual change up to 0.4% from the 0.3% measure for October. EUR/USD moved away from the day’s low following the release of the data, trading down just 0.1% at 1.0580. November’s flash inflation data for the eurozone as whole will be released on Wednesday morning.
The other major central bank that is meeting this week is the Bank of Canada. No change in monetary policy is expected in the announcement on Wednesday, though that could change if there are any surprises in Tuesday’s Canadian monthly GDP data. Canada’s economy is expected to have grown 0.1% in September, despite export prices being hit by lower commodity prices. The Loonie was one of the few currencies to gain against the US dollar this morning, USD/CAD slipping 0.18% to 1.3346.
Domestic data got off to a weak start on Monday with the Chicago PMI sliding to a worse-than-expected 48.7 in this month’s reading, in a surprise return to levels that suggest contraction, after swinging up to 56.2 in October. The weakness in the indicator tallied with a negative mood on Wall Street that saw stock prices dipping in early trading. Shortly after the opening bell in New York, the Dow Jones was trading down 15 points or 0.09%, while the S&P 500 Index fell 0.14% to 2087.3.
We also have the National Association of Realtors’ pending homes sales index on Monday, which is expected to gain 0.1% for October. Highlights for the rest of the week include widely-followed measures of US manufacturing from Markit and the ISM on Tuesday, the ISM non-manufacturing index on Thursday, and official government employment data for November on Friday. Non-farm payrolls are expected to have grown 190,000 last month, while the unemployment rate is expected to hold at 5.0%. Should these expectations prove accurate, it would likely reinforce the outlook for Fed tightening at the December FOMC meeting.
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