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Analytics for a week (4-10.11)

Euro \ dollar: Last week results and forecast for the upcoming period.

The euro / dollar rose to the level of 1.1165 after a meeting of the Federal Reserve last week. The correction phase has been going on for more than a month, and in the short term quotes are aimed at continued growth.

The European currency remains in a disadvantageous situation, as low inflation, a slowdown in growth and the beginning of the ECB's securities purchase program significantly reduce the possibility of recovery. At the same time, a series of interest rate cuts in the United States slightly reduced the divergence of the monetary policy of the ECB and the Fed. This was the key factor that triggered the growth of the euro / dollar pair by almost 300 points since the beginning of October. Moreover, some forecasts suggest another cut in the Federal Reserve rate at the beginning of 2020. In this case, the US dollar will weaken even more. Our assessment of the situation shows that the Fed is unlikely to cut rates in the near future.

Last week, the first estimate of US economic growth in the third quarter of 2019 was published. The indicator was 1.9% in annual terms and exceeded all expectations. Growth declined compared to the second quarter, but given the trade wars with China and the EU and the general slowdown in the economy, the data can be considered strong. For the second month in a row, inflation in the USA is growing at 1.7%. The indicator is inferior to the Fed target, and it is precisely insufficient inflationary pressure that could become a formal reason for a new reduction in the interest rate. Fed Chairman Jerome Powell noted low inflation as one of the key risks for the regulator. Other risks he called a slowdown in the global economy and the situation with foreign trade. Powell defined the latest rate cut as a preventive measure of insurance against these factors. Obviously, a further decline in inflation in the United States and rising global risks could lead to further easing of monetary policy. But the likelihood of a sharp deterioration in the situation is small, the latest data from the US economy show this.

Data on economic growth and inflation in the Eurozone remain weak. Consumer price growth fell again in October to just 0.7%. Core inflation rose 1.1%. The Eurozone economy strengthened 1.1% in the third quarter on an annualized basis. Starting this month, the ECB begins a new phase of the quantitative easing program. It will last about two years and even longer if inflation does not increase. Already the former head of the ECB, Mario Draghi, said at his last press conference that the current approach to monetary policy is absolutely justified, and most importantly, that easing will continue if necessary. It is difficult to imagine the growth of the single currency in such conditions, when the weak data of the Eurozone dictate the need for further reduction.

In our forecast for the coming week, we assume a reversal and decrease in the euro / dollar pair to support levels of 1.1140, 1.1120, 1.1100, 1.1070 and 1.1040.

Economic statistics next week.

In macroeconomic statistics coming out next week, the following indicators can be distinguished:

Monday

Australia will publish the ANZ job index, retail sales and inflation data from TD Securities.

SECO Consumer Confidence Index will be released in Switzerland. In Spain, Italy, France, Germany and the Eurozone, business activity indicators in the manufacturing sector will become known. In the UK will publish an index of activity in the construction sector.

In the United States will come out data of production orders and the index of business conditions ISM New York.


Tuesday

Australia will release an index of activity in the service sector from AiG. The meeting of the Reserve Bank of Australia will be held on the same day, the decision on the interest rate will become known. In New Zealand will publish the commodity price index from ANZ. China announces PMI Caixin index in the services sector.

Industrial production data will be released in Sweden and retail sales data and business activity index in the services sector in the UK. In the euro area will publish an indicator of producer prices.

In Canada, there will be data on imports, exports and general statistics on international trade in goods. In the United States will publish the Redbook retail sales index, the ISM business activity index in the services sector and the economic optimism index from IBD / TIPP. The American Petroleum Institute will report on stocks of petroleum products last week.


Wednesday

New Zealand will publish unemployment, changes in employment and labor cost index. A meeting of the monetary policy committee will be held in Japan and the PMI manufacturing index will be released.

In Germany, production order data will become known. In Russia, Spain, Italy, France, Germany and the Eurozone will publish indicators of business activity in the service sector. In the Eurozone, retail sales data will be released.

In Canada, the Ivey business activity index is released. In the United States will publish labor productivity data excluding the agricultural sector and cost data per unit of labor. The US Energy Information Administration will unveil changes in last week's commercial oil reserves.


Thursday

Australia will release data on imports, exports, total trade balance and activity index in the construction sector from AiG. In New Zealand, the Reserve Bank's inflationary expectations will be published.

In Germany, industrial production data will become known. Halifax Housing Price Index Released In UK The Eurozone will publish the ECB's economic bulletin and economic growth forecast. A meeting of the Bank of England will be held in Great Britain, and Mark Carney, head of the Bank of England, will speak. The decision to change the interest rate and the planned volume of asset purchases will become known. In the United States will publish the number of initial and repeated applications for unemployment benefits. Energy Information Management will present changes to last week’s US natural gas reserves.


Friday

In Japan, there will be data on household spending, investment in foreign and national securities, and leading and matching indicators. In Australia, they will publish the position of the Reserve Bank on monetary policy and mortgage data. China publishes import, export data and general trade balance. In Switzerland, the unemployment rate will become known. In Germany and France will publish data on imports, exports and the overall trade balance. In Canada, the unemployment rate and data on the growth of average wages will be released. In the United States will publish the consumer confidence index of the University of Michigan. Baker Hughes will report on active rigs.