Daily Forex Fundamental Overview

Fundamental Analysis

EUR

“The radical left-wing Podemos has dropped back considerably in the opinion polls. However, the question of whether a stable government can be found is still open.”

- Commerzbank

Spain’s economy slowed in the third quarter, but remained on track to enjoy the strongest growth since 2007. The Euro zone’s fourth biggest economy moderated to 0.8% in the September quarter, according to INE, following the 1% growth in the preceding three-month period. The reading marked the ninth straight quarter of growth. The biggest driver of the quarterly growth was the investment, which climbed 1.1%, followed by a 1.0% increase in household consumption. Exports surged 2.8%, while imports advanced 4.0% quarter-on-quarter.

In the twelve months through September, GDP growth added 3.4%, compared with the second quarter’s 3.1% expansion. Last year, the Spanish economy grew 1.4%, while this year the government is predicting a 3.3% GDP growth. Nevertheless, the economy is facing a number of headwinds. The jobless rate in Spain remains the highest in the currency bloc after Greece, while the European Commission warned that Spain is likely to fail to meet the agreed target to bring its budget deficit down to 4.2% of GDP from 5.8% of GDP last year. Moreover, Spaniards are heading to a December 20 general election, in which the current government of Prime Minister Mariano Rajoy is seeking for re-election.

JPY

“Job offers are surging but the average sum each employee is earning isn't rising much. That's why household income isn't increasing and consumption remains weak”

- Taro Saito, senior economist at NLI Research Institute

Japan’s consumer price inflation eased for the third month in a row, while household spending also dropped, putting greater pressure on the Bank of Japan to boost inflation expectations, while the world’s third biggest economy is in recession. The disappointing data came despite signs that Japan’s labour market remained tight, with the jobless rate at a two-decade low of 3.1%, compared with 3.4% in September. Inflation slid further away from the central bank’s 2% goal in October, with the BoJ’s preferred gauge, CPI that excludes fresh fruit and energy prices, climbing 0.7% last month following September’s 0.9% growth. The national core CPI, which strips out only fruit prices, dropped at a steady pace of 0.1% year-on-year in October. At the same time household spending declined 2.4% last month from a year earlier, against economists’ expectations for a 0.1% gain, while disposable income decreased 0.3%.

Earlier this month, official figures showed that Japan's gross domestic product shrank 0.2% in the September quarter, or an annualised contraction of 0.8%, marking the second consecutive quarterly decline. Yet, many BoJ officials are reluctant to expand an already unprecedented massive stimulus programme unless sluggishness in foreign demand persists long enough to dent affect business confidence.

AUD

“You are likely to see some downwards revisions to GDP. Weakness is across the board, in services and capex. Total planned spending looks largely unchanged since the last time. So these are still pretty soft numbers all around.”

- Su-Lin Ong, RBC Capital Markets

Private capital expenditure in Australia dropped sharply in the third quarter, driven by renewed weakness in mining investment. Australian firms held back on investing in new capital in the three months through September, signalling business confidence is still weak amid Australia's economic transition away from mining-driven growth. Private capex plummeted a seasonally adjusted 9.2% quarter-on-quarter, marking the biggest decline in more than 15 years, the Australia Bureau of Statistics said. The sharp fall in the July-September period followed the 4.4% decrease in the preceding quarter. Economists, however, had expected a milder decline of 2.8% in the reported period. Mining expenditure plunged 10.4% over the quarter, with spending on buildings and structures tumbling 10.5% and spending on plant and machinery down 9.7%. The fourth estimate for 2015-2016 private capex spending came in at $120.35 billion, revised up from the third estimate of $114.81 billion.

Reserve Bank of Australia Governor Glenn Stevens admitted that the slowdown in mining investment is only about half way through its cycle, and did not expect an immediate recovery in non-mining investment ahead for Australia.

•  Download Full Daily Forex Fundamental Overview