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What a week it was for the Dollar, as the global reserve currency posted its longest string of positive sessions since 2013 to reach a record 13-year high when weighted against a basket of its peers. A bout of increased optimism of the state of the US economy under the leadership of President-elect Donald Trump and record macro data (lowest jobless claims in 4 decades) has led Bloomberg to assign a 98% probability that Fed Chair Yellen and the FOMC will hike interest rates on December 14. It is unlikely that the release of the FOMC’s latest set of minutes on Wednesday will drastically impact current projections for a December rate hike, although (as usual) it will be picked apart for any solid indication that a rate hike in 3 weeks time from members.
Note, however, that the Thanksgiving holiday in the US on Thursday will reduce liquidity in the market for the Dollar and subsequently other currencies (see below) may be at greater risk of larger than normal swings as a result of reduced market participation.
Away from the US, the focus for the UK’s Sterling will be firmly centered on the first Autumn Statement from Chancellor of the Exchequer Phillip Hammond on Wednesday. With the Pound’s recovery from October’s ‘flash crash’ seemingly running out of steam, hope for a statement with a strong fiscal stimulus and a hawkish outlook may be just what the doctor ordered, however concerns remain that the growing budget deficit may hamper any meaningful contribution by the new Chancellor to help UK growth.
Friday’s latest GDP figure could also be a driver for Sterling, especially given the Thanksgiving holiday on Thursday evening (and a half day for both NYSE and Nasdaq on Friday), although as a second estimate has less bearing than last month’s expectation-beating 0.5% figure.
Finally, the Eurozone’s single market currency is once more under pressure from politics, with Donald Trump’s victory two weeks ago paving the way for a rise in populism across Europe. Most immediately, fears that a defeat for Italian PM Matteo Renzi in the upcoming December 4 constitutional referendum will lead to a collapse of its government and French far-right politician Marie le Pen gaining traction in the run up to France’s general election next year are contributing to the Euro’s weak performance against its peers. Predictions that the Euro could reach parity with the US Dollar (as a result of Trump’s Dollar reflation) are becoming more poignant the closer to that marker we get.
On the flip side, a range of Eurozone macro data released on Wednesday may be able to sooth the negative outlook for the country, especially if there is a broad based uptick in the figures, while an appearance by ECB President Mario Draghi before the European parliament could offer an insight into the central bank’s next course of action, especially regarding its lacklustre QE programme. To taper or to extend? That is the question.
Key data this week (Sign up here to get our daily live macro-calendar)
UK Economic Announcements
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Intl Economic Announcements
13:30 Chicago Fed (US)
14:00 Conf Board Lead Econ (China)
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UK Economic Announcements
11:00 CBI Sales & Orders Trends
Intl Economic Announcement
15:00 Richmond Fed, Existing Home Sales (US)
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UK Economic Announcements
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Intl Economic Announcements
01:45 MNI Business Indicator (China)
8-9am PMI Manuf & Services (EZ)
13:30 Durable Goods Orders (US)
14:00 House Price Index (US)
14:45 PMI Manufacturing (US)
15:00 New Home Sales, UoM Consumer Confidence (US)
15:30 Crude Oil Inventories (US)
18:00 Fed FOMC Minutes
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UK Economic Announcements
09:30 BBA Home Loans
Intl Economic Announcements
US Holiday – Thanksgiving
00:30 PMI Manufacturing (JP)
07:00 GDP (DE)
09:00 IFO Surveys (DE)
12:00 GFK Consumer Confidence (DE)
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UK Economic Announcements
09:30 GDP, Services, Exports, Imports
11:00 CBI Retail Sales
Intl Economic Announcements
US Half-Day Holiday – Thanksgiving
13:30 Wholesale Inventories (US)
14:45 PMI Services (US)
Technicals
Technicals
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