The first week of the month is always a tremendously exciting period in terms of economic data, and the week commencing December 3rd stands out as one which can deliver many trading opportunities.
Straight off the back of an eventful G20 summit, which included some rancorous encounters as well as the signing of the new USMCA deal between Canada, Mexico and the US as well as a 90-day abatement of the imposition of additional trade tariffs from the US on Chinese goods, the G20 can be seen as a relative success for US President Trump. US markets should react positively. After last week’s relatively dovish Federal Reserve Bank minutes and Fed Chair Jerome Powell’s address to the Economic Club of New York, the dual positive of better US/Chinese relations and a less aggressive Fed may give US equity bulls the confidence they need to stage an end of year rally.
On the US data front, we have four very timely data releases which can either aid or impede the positivity of the last few days; those being both the ISM Manufacturing and Services Surveys, ADP Employment numbers and Non-Farm-Payrolls. ISM Manufacturing for November scheduled for release on Monday is expected at 58 versus last month’s 57.5. ISM Services (Nov) out on Wednesday is expected at 59.5 versus last month’s 60.3. ADP employment (Nov), also out on Wednesday and which can give markets a jolt, is expected at +200K versus last month’s +.227k. Payroll’s on Friday is expected at +205k for November versus last month’s +250k. The US unemployment rate is expected to stay at 3.7%. I think the mood in the US will be relatively festive until year-end. Also, of importance is Wednesday’s testimony of Fed Chair Powell to the Joint Economic committee. Counter to any expected rally may be some profit taking as some institutional investors book their annual profits and look forward to the New Year and what it might bring.
There are additional trading opportunities in both the Australian and Canadian dollars this week. The Reserve Bank of Australia releases its interest rate decision on Tuesday expected to be unchanged at 1.5% and Australian 3rd quarter GDP is released early Wednesday morning and is expected at 3.3% (Y.o.Y). The RBA has been cautious on raising interest rates, citing geo-political risks and falling house prices in Sydney and Melbourne as reasons for its reluctance. GDP is one of the metrics it observes, as well as rising wages and employment. If GDP stays above 3%, then we can see this as a general positive for Australia and the Australian dollar. The Bank of Canada releases its interest rate decision on Wednesday and this is expected to remain unchanged at 1.75%. On Friday, Canadian Employment numbers will be released, expected to show a gain of +15,000 jobs.
In the UK, there is real tension, and this week will be an unmercifully tough week for Prime Minister Theresa May! Bank of England Governor, Mark Carney is due to speak to Parliament on Tuesday. Last week, The Bank of England’s gloomy assessment for the UK economy post Brexit, or post “no-deal” was depressing! There are legitimate calls for a new referendum. And if this comes to fruition it will be the culmination of a disastrous two years for the Conservative party. December 11th is the day chosen for the date of a vote on the current Brexit agreement. The pound in my view, will remain under pressure this week. Eurozone 3rd quarter GDP expected at 1.7% ( Y.o.Y) is also released on Friday but is unlikely to be a market moving event.
Good luck and good trading. Watch out for me on video on Tuesday and Thursday. Ben Robson
