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Analytics for a week (9-15.12)

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

 

The euro / dollar turned around from the support level of 1.1000 and reached the level of 1.1060 by the end of last week. At the auction, the pair rose to a new monthly high of 1.1116.

For more than a month, the euro / dollar has been trading in the range 1.1000–1.1100. Periodic attempts to break through one of the boundaries of the interval result in failure and another rollback. The markets lack a strong impulse, even the record high US employment figures released on Friday led to a pair drop of only 50 points. More importantly, these data are not enough to ensure the development of a long-term downtrend and a breakdown level of 1.1000. Three recent US interest rate cuts have weakened the dollar significantly. Markets want evidence of the stability of the US economy in order to continue to buy American currency.

In the long run, the euro / dollar is still under pressure. Recent Eurozone data showed a weak strengthening of the economy and inflationary pressures. But overall, performance is still weak, especially in contrast to the United States. German industrial production shows a record drop since April. The indicator decline in October was 1.7%, and this is the worst result for six months. In annual terms, industrial production in Germany has already declined by 5.3%. After GDP growth in the 3rd quarter, even a negative value in the 4th quarter will not lead Germany to a technical recession for the whole of 2019. But if the current trend continues, it cannot be confidently asserted that a recession will not happen in 2020.

According to the BBVA research department, recent Eurozone economic reports show some improvement in growth and inflation. Economic growth stabilized at 0.2% in the 3rd quarter of 2019, which is slightly better than expected. Sustainable domestic demand in most countries in the region supports overall GDP growth. The German economy has grown a bit due to the strong strengthening of net exports.

It is expected that a weak momentum will continue in the fourth quarter of 2019. The growth of the Eurozone economy will remain in the stable range of 0.1% -0.2%. The risks of a serious fall remain low. The likelihood of a tough Brexit or new tariffs on imports of European cars in the near future decreased. Purchases by the Central Bank of securities will ensure inflation recovery in the long run and slowdown in the short run.

In our forecast, we expect a decline in the euro / dollar to support levels of 1.1040, 1.1020 and 1.1000, after which we assume a reversal and restoration of quotations to the levels of 1.1060 and 1.1080.

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

Monday

Japan will publish annual GDP data, foreign trade balance and current situation index from Eco Watchers.

In Switzerland, the unemployment rate will become known. In Germany, there will be data on imports, exports and the overall trade balance. Eurozone Introduces Sentix Confidence Indicator.

In Canada, the indicators of the started construction of houses and issued building permits will be published. Short-term securities will be placed in the USA.


Tuesday

The head of the Reserve Bank of Australia, Philip Lowe and his deputy Michelle Bullock, will make statements. Also in Australia will publish a housing price index and an average annual report on the prospects for the economy and finance. China announces consumer price index, producer price index and foreign investment data.

In the UK will publish data on industrial production and manufacturing in the manufacturing sector, the index of activity in the service sector, the overall trade balance and monthly GDP growth. In Germany, there will be an index of sentiment in the business environment and an indicator for assessing current economic conditions according to the ZEW Institute. Eurozone will present an index of economic sentiment.

The NFIB Business Optimism Index, Redbook retail sales, labor costs, and labor productivity metrics will be released in the United States. The USDA will publish a supply and demand forecast. The American Petroleum Institute will report on oil reserves last week.


Wednesday

New Zealand will release retail sales data. Australia publishes Westpac Consumer Confidence Index. In Japan, producer price indices and activity of large enterprises will be released.

In Sweden, the consumer price index will be published.

The United States will publish inflation indicators, including basic and basic consumer price indices. In the evening, a meeting of the Federal Committee for Open Markets will take place, the decision on the interest rate in the United States will become known. The regulator will also publish a summary of economic forecasts. Energy Information Management will present changes in commercial oil inventories in the US last week.


Thursday

In New Zealand will publish a housing price index. In Japan, there will be data on orders for engineering products and indicators of foreign and national investment in securities. In Australia, expectations for consumer price inflation will become known. The Reserve Bank of Australia will present an economic bulletin. New Zealand will release a monthly inflation report from ANZ.

Extraordinary parliamentary elections will be held in the UK. In Sweden, the unemployment rate will be published, and in Switzerland - the SECO economic development forecast and producer price index. In Germany and France, consumer price indices will be released. Meetings of the Central Banks will be held in Switzerland and the Eurozone, a decision on the interest rate will be announced and a press conference of the monetary policy guide will be held. Also in the Eurozone, industrial production data is released.

The US will publish a producer price index and the number of initial and repeated applications for unemployment benefits. In Canada, there will be an index of housing prices in the primary market. Bank of Canada CEO Stephen Poloz will deliver a speech. Energy Information Management will present changes in US natural gas reserves last week.


Friday

In New Zealand will publish an index of business activity in the manufacturing sector and a study of consumer sentiment from Westpac. In Japan, there will be an index of business activity in the services sector, an indicator of activity for large enterprises of all industries of Tankan and industrial production data.

In Spain, the consumer price index will be published, and in Italy - indicators of industrial production. In the UK, published a forecast of consumer price inflation. In Russia, the decision on the interest rate will become known.

In the United States, retail sales data, import and export price indices will be released. Baker Hughes will unveil stock changes for active rigs last week.