No Normal December

30 Nov

Posted by RVR Ventures In Analysis 0 comment

December may normally be associated with everything slowing down as we ease our way into the festive period, but as with everything else in 2020, this is no normal December.

Donald Trump is continuing to fight the election result and is going out swinging, Brexit talks are somehow still ongoing, the EU budget and rescue fund is at risk, the Fed and ECB may add to the enormous stimulus efforts of central banks this year and OPEC+ may have one final trick up its sleeve. A few more twists and turns to come, it seems.

Here are the key market moving factors for the week:

The US

This week will provide crucial updates to both the labor market and manufacturing sector. The coronavirus spread and growing restrictions being imposed across the country have yet to really impact manufacturing and hiring until possibly now.
On Tuesday, the ISM manufacturing report is expected to show last month’s reading was the peak of the current recovery. The highly watched index is expected to decline from October’s 59.3, which was the highest level since September 2018, to 57.8. The fourth quarter slowdown is widely expected, but what might start becoming the consensus is for the first quarter to deliver an economic contraction.
The last nonfarm payroll report of the year comes ahead of a live Fed meeting. FOMC officials should be ready to act as softening jobs data could lead to permanent damage to the labor market. The upcoming nonfarm payroll is expected to see 500,000 jobs created in November, but given the recent weakness, investors might not be too surprised if we saw hardly any job gains.

EUROPE

The European Central Bank (ECB) should stop talking about fiscal policy as it feeds the perception that the bank is running out of ammo, according to Robin Brooks, Chief Economist at the Institute of International Finance (IIF).
The 17-nation central bank should focus on the core issue of interest rate differentials and its impact on the EUR exchange rate.
“Eurozone interest rates haven’t fallen as much as US rates (blue). That’s putting appreciation pressure on the Euro, which is threatening Eurozone reflation,” Brooks tweeted on Sunday.

The UK

Face to face talks will continue on Saturday as Michel Barnier returns to London after undergoing self-isolation. Progress has slowed during virtual talks and can hopefully gather some momentum once again, with there being barely any time left to reach a deal and get it ratified.
We’re seeing more public rhetoric once again, but that’s perhaps to be expected as we get into the final points. With talks taking part every day, there is increased weekend risk, with the markets currently not factoring in the possibility of negotiations collapsing, leading to no deal.

JAPAN

This week offers a selection of tier-three data in Japan that should have little impact although the stock market is continuing to make solid gains as part of the vaccine rotation recovery move.

AUSTRALIA

Australia is mulling World Trade Organization (WTO) action on China’s decision to slap export tariffs on the country’s barley exports, Trade Minister Simon Birmingham said on Sunday.
The escalating trade tensions between Australia and China are limiting the upside in the AUD/USD pair. The aussie pares gains to trade below 0.7400, having faced rejection near multi-month highs of 0.7415 in early Asia.

CHINA

Manufacturing and services PMIs headline the data releases from China next week as the country continues to perform solidly, despite countries around the world once again struggling to come to terms with another wave of COVID-19.

Market Overview:

Gold

One-month risk reversals on gold continue to fall on put demand.
According to data source Reuters, the gauge is currently trading at -0.85 in favor of puts (bearish bets), having peaked at 1.35 in favor of calls (bullish bets) on Nov. 6.
The sharp slide is the result of investors adding bets to position for losses in the safe-haven metal amid increased expectations for swift global economic recovery on potential coronavirus vaccines.
Gold is trading at $1,768 per ounce at press time, the lowest level since Sept. 6. The metal is down over 5.5% on a month-to-date basis.

Oil

WTI wavers around $45.15, down 1.25%, during the early Monday’s trading. The energy benchmark has been trading between $44.62 and $46.30 after refreshing the highest since March during last Wednesday.
In doing so, the energy benchmark refrains from respecting upbeat news from the monthly Joint Ministerial Monitoring Committee (JMMC) by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, mostly known as OPEC+. The group conveyed an inability to agree over the planned easing of reduction in output.

Below are the major market moving events for the week:

All times listed are EDT

Monday

10:00: US – Pending Home Sales: expected to jump to 1.0% from -2.2%.

20:45: China – Caixin Manufacturing PMI: seen to edge lower to 53.5 from 53.6.

22:30: Australia – RBA Interest Rate Decision: predicted to hold at 0.1%.

Tuesday

3:55: Germany – Manufacturing PMI: expected to remain flat at 57.9.

3:55: Germany – Unemployment Change: forecast to have increased to -5K from -35K.

4:30: UK – Manufacturing PMI: estimated to remain at 55.2.

5:00: Eurozone – CPI: likely edged higher, to -0.2% from -0.3%.

8:30: Canada – GDP: to decline to 0.9% MoM from 1.2%.

10:00: US – ISM Manufacturing PMI: seen to have decreased to 57.9 from 59.3.

19:20: Australia – GDP: expected to jump to 2.5% from -7.0% QoQ.

Wednesday

8:15: US – ADP Nonfarm Employment Change: forecast to rise to 400K from 365K.

10:30: US – Crude Oil Inventories: seen to increase to 0.127M from -0.754M.

Thursday

4:30: UK – Services PMI: anticipated to remain flat at 45.8.

10:00: US – ISM Non-Manufacturing PMI: likely to have edged lower, to 56.9 from 56.6.

19:30: Australia – Retail Sales: expected to soar to 1.6% from -1.1%.

Friday

1:15: India – Interest Rate Decision: forecast to remain flat at 4.00%.

4:30: UK – Construction PMI: seen to dip to 52.0 from 53.1.

8:30: US – Nonfarm Payrolls: estimated to drop to 500K from 638K.

8:30: Canada – Employment Change: seen to plunge to 27.5K from 83.6K.

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

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