Week Ahead: China Troubles, Inflation Data, Powell and NFP Ahead
The main focus for the week for forex traders will be economic data, namely European CPI, US Core PCE and US Non-Farm Mass Payroll (NFP).
Last week was a little slower than usual in forex due to the Thanksgiving holiday in the US, but the RBNZ still managed to squeeze in a hawkish 75 bps rate hike! Unrest at China’s iPhone factory and continued Covid lockdowns have sown concern in markets of a continued slowdown. Will it continue this week? But this week should be all about data. Regarding inflation, the EU publishes the November CPI flash and the United States publishes the Core PCE. In addition, the United States publishes non-farm wages. Powell also spoke about the economy and the labor market at the Brookings Institute on Wednesday. Watch for other clues as to whether the next Fed interest rate hike will be 50 basis points or 75 basis points!
Reserve Bank of New Zealand
The Reserve Bank of New Zealand (RBNZ) raised the OCR rate by 75bps last week to bring the key rate to 4.25%, the highest since January 2009! The committee discussed the house with the rate up to 100 basis points, but in the end I went with 75 basis points. In addition, the Committee has gone from 4.1% to 5.5%, so it will be present in September 2023! This is not only higher than the terminal rate frequented by the US Fed, but also further away. The RBNZ also noted that New Zealand’s economy could experience a setback in the middle of next year, mainly due to labor shortages and wage pressures. I also indicated that box prices are down 20% from their peak of last year. The RBNZ also forecasts a CPI of 7.5% in 2023 (vs. 5.3% up) and 3.8% in 2024 (3.01% up).
Covid breaks out in China with a vengeance
Since I started in a Covid lockdown at Foxconn Technology Group, which assembles iPhones, it’s become a full-scale riot as workers leave after the company offered to give the rest of the employees a paying benefit, but had not paid. Apple also indicated that shipments of the iPhone would be delayed. Eight districts in Zhengzhou, including “iPhone city”, have been ordered to stay at home for five days. The closures have only added fuel to the fire, as 6.6 million people are confined there. In Beijing, infections are reaching near record highs and lockdowns and restrictions are returning to numbers not seen since the start of the pandemic. To help ease the markets a bit, the PBOC cut the reserve requirement ratio by 25 basis points, allowing banks to free up $70 billion in capital. Will the riots and demonstrations continue this week? How do lockdowns affect production? Will supply chain issues increase again? These will all be questions traders in the forex and financial markets will be asking over the next few weeks.
Fed Chairman Powell is a Brookings alumnus
Fed Chairman Jerome Powell will speak on the economy and labor markets this week at the Brookings Institute. After the next FOMC meeting on November 2, Powell changed the recitation of the meeting from dovish to hawkish. The statement says that “determining the pace of rate increases means cumulative reduction, political shifts, and economic and financial developments.” Markets are reading this as dovish. Notwithstanding, the lords of the press conference that followed, Powell said that “the incoming ladies suggest that the latest level of the rate will be higher than expected.” Markets added to these comments as warmongers. After that, the October CPI was 7.7% yoy from a previous reading of 8.2% yoy. Although the October reading is well below the September cell, it is just present with the Fed’s 2% highs and lows to the economy. With the latest high inflation numbers and still strong jobs data, which Powell will the markets see: the dovish Powell, who wants to account for policy mismatches, or the belligerent Powell, who talks about higher high rates to fight inflation?
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Earnings season is nearly over, but there are a few market names that will catch your eye this week. Here are some of the biggest names due out this week: HPE, CINQ, CRM, INTU, BIG, DG, KR, MVL.
This week’s financial donations will be important! Powell was talking about mercy, which also happened on the last day of November (watch for month-end streams). On Thursday, the United States released the Fed’s favorite inflation measure, the Core PCE. Printing is expected to fall to 5% YoY from 5.1% YoY in September. Then on Friday, the United States released employment data. The Nonfarm Payrolls print for November is expected to be +200K vs. +216K in October. Although inferior, it is still expected to be strong. A stronger impression could give the Fed confidence to raise the rate by 75 basis points at the December meeting. Additionally, on Wednesday, the EU will release its first preview of November CPI data. The stock’s print is expected to fall to 10.4% YoY from the expected 10.6% YoY. A higher print could also push the ECB up 75 basis points at its December meeting. Other important economic data due out this week include:
Sunday – November 27, 2022
China: Industrial Benefits (YTD) (OCT)
Australia: Prel. retail sales (OCT)
Monday – November 28, 2022
United Kingdom: CBI Distribution Trades (NOV)
United States: Dallas Fed Manufacturing Index (NOV)
Japan: unemployment rate (OCT)
Japan: Sales breakdown (OCT)
Tuesday – November 29, 2022
United Kingdom: BOE consumer credit (OCT)
EU: Economic Sentiment (NOV)
Germany: CPI Prel (NOV)
Canada: GDP growth rate (Q3)
United States: S&P/Case-Shiller (SEP) real estate prices
United States: CB Consumer Confidence (NOV)
New Zealand: Building permit (OCT)
Japan: Preliminary Industrial Production (OCT)
New Zealand: ANZ Business Confidence (NOV)
Australia: Monthly CPI Indicator (OCT)
Australia: Permission to build prel (OCT)
China: PMI manufacturers NBS (NOV)
China: NBS Non-Manufacturing PMI (NOV)
Wednesday – November 30, 2022
Japan: Housing starts (OCT)
Switzerland: KOF Advanced Indicators (NOV)
Germany: evolution of unemployment (NOV)
EU: IPC Flash (NOV)
United States: Evolution of ADP employment (NOV)
United States: GDP growth rate 2nd East (Q3)
United States: Speech by Fed Chairman Powell
United States: Chicago PMI (NOV)
United States: door-to-door sales (OCT)
United States: Fed Beige Book
crude oil inventories
China: Caixin Manufacturing PMI (NOV)
Thursday – December 1, 2022
Global: Final Manufacturing PMI (NOV)
Japan: Consumer Confidence (NOV)
Germany: Retail sales (OCT)
UK: National House Prices (NOV)
EU: Unemployment rate (OCT)
United States: Personal Dependency (OCT)
United States: personal income (OCT)
United States: PCE Price Index (OCT)
United States: ISM constructor PMI (NOV)
United States: Building allowances (OCT)
New Zealand: export price (T3)
New Zealand: import price (Q3)
Australia: Speech by RBA Governor Lowe
Australia: Final Retail Sales (OCT)
Australia: home loan (OCT)
EU: Speech by Lagarde, President of the ECB
New Zealand: Speech by Orr, Governor of the RBNZ
Friday – December 2, 2022
Germany: trade balance (OCT)
Canada: Change in employment (NOV)
United States: NFP – Non-Farm Payroll (NOV)
See » Economic Calendar
Weekly forex chart » GBP/USD 4 hour
the course of the pair GBP/USD moved well away from its lows of September 26, when it hit 1.0357. Most recently the pair moved higher from 1.1366 and formed a flag near the 1.1700/1.2000 area. As the price approached the top of the flag, the GBP/USD pair was broken higher. The target for a flag is the height of the flag’s “pole” added to the break point. In this case, it is close to 1.2540. Of course, the price rarely moves in a straight line, and on the way to the target, the pair has consolidated in a flagging pattern near 1.2100. If price breaks higher, the pattern target is near 1.2325. Short-term resistance lies at the short-term flag high near 1.2155. Above this, horizontal resistance holds the August 10th highs at 1.2277. If GBP/USD is trading above the flag target, the next resistance is at 1.2670, the May 27 high. However, if the correction continues to decline, the first support will be at the November 15th high at 1.2029. Below that, support lies at the flag lows near 1.1709, then the October 26 highs at 1.1645.
Will unrest and lockdowns in China continue this week? If so, it could affect the markets. However, the main focus for the week will be the women’s economics, namely the European CPI, the US Core PCE and the US non-farm payrolls. Add in a speech from Fed Chairman Powell and this week in forex could be volatile!
By Joe Perry, CMT, FOREX.com » Official Site
Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or solicitation to buy or sell forex cambio contracts or CFDs. Although the information contained in the document comes from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages which may result in a breach.