Forex Weekly Outlook Nov 30-Dec 4

The US dollar managed to gain some ground in the Thanksgiving week. A very busy week awaits us in the first week of the last month: 3 rate decisions with the ECB gaining a lot of traction, a full buildup to the US Non-Farm Payrolls as well as a testimony from Fed Chair Janet Yellen. Here is an outlook for these key events and more.

The U.S. economy released some positive figures such as a better growth rate, showing an annual GDP gain of 2.1% in the third quarter. Furthermore, US Jobless claims fell 12,000 last week to 260,000, beating forecast for a 273,000 reading. Not all data has been great, but it seems good enough for the Fed to proceed with a rate hike on December 16. In the euro-zone, we heard some ideas for the ECB decision, that weighed on the euro. The stabilizing of oil prices only partially helped the loonie and the Aussie only partially enjoyed the lack of appetite for a rate hike. Let’s start,

1. Chinese Caixin Manufacturing PMI: Tuesday, 1:45. This independent measure from the world’s No. 2 economy always shakes the A$ but also impacts the whole world, especially after the stock market crash in August. A repeat of 48.3 points is expected for November. This reflects contraction.
2. Australian rate decision: Tuesday, 3:30. The Reserve Bank of Australia kept the cash rate at 2% for the sixth month in a row in November, but left the door open to another cut in the next few months.  RBA governor Glenn Stevens said that the slow pace of inflation might allow further easing of policy. The decision was in line with market forecast.
3. Mark Carney speaks: Tuesday, 9:00. Bank of England governor Mark Carney will speak about the Financial Stability Report and UK Bank Stress Testing, in London. He said that UK interest rates are expected to remain low “for some time” and that rates should remain at 0.5% until mid-2016 at the earliest. Meanwhile, the central bank monitoring groups of households to find out what impact any rate hike would have.
4. Canadian GDP: Tuesday, 13:30. Canada’s gross domestic product expanded for a third month in a row in August, but at a slower than expected pace. GDP rose 0.1% in August from July, in line with forecasts. Economists said the August rise might contribute to a 2.5% positive growth rate in the third quarter. The August gain was driven by solid growth in manufacturing and retail sales, both rising 0.6% July, as well as a continued improvement in energy and mining output. GDP is expected to rise 0.1% in September.
5. US ISM Manufacturing PMI: Tuesday, 15:00. The Institute for Supply Management manufacturing index declined to 50.1 in October, the lowest level since May 2013, after posting 50.2 in September. The index hangs close to the 50 point mark between expansion and contraction. The strength of the dollar as well as low oil prices weigh on manufacturers. The new orders sub-index increased to 52.9 from 50.1 in September, but export orders continued to contract. The employment index contracted in October for the first time in six months, hitting its lowest level since August 2009, suggesting more weakness in factory payrolls. Manufacturing PMI index is expected to post 50.6 in November.
6. Australian GDP: Wednesday, 0:30. Australia expanded at the slowest pace in two years amid a sharp fall in export volumes. GDP gained 0.2% following solid 0.9% rise in the previous quarter. Analysts expected a 0.4% rise. Government and household consumption showed biggest gains while Exports of goods and services fell 3.3%. The Reserve Bank of Australia sees growth between 2.0 and 3.0% to June 2016. A growth rate of 0.7% is expected this time.
7. US ADP Non-Farm Payrolls: Wednesday, 13:15.  U.S. private sector employment increased more than expected in October, a seasonally adjusted 182,000. The reading boosted optimism over the health of the economy and the growing chances for a U.S. interest rate hike this year. The economy created 190,000 jobs in September, downwardly revised from a previously reported increase of 200,000. Despite the volatility of this report, it does give guidance on private-sector hiring. ADP estimate for November is expected to show a job gain of  191,000.
8. Janet Yellen speaks: Wednesday, 13:30 and 17:25 at a conference and an official testimony on Thursday at 15:00. Federal Reserve Chair Janet Yellen recently suggested that a December interest rate increase is still on the table. Yellen said that the committee has made no decision yet but that December rate hike was still a “live possibility”. In her public appearances, the last before the December 16th Fed decision, the Fed chief can cement a rate hike and could reiterate that the next moves will be extremely gradual, something that the markets may have already been considering. She may also have early access to the NFP data on Friday, and perhaps we could interpret her tone to what is expecting us.
9. Eurozone rate decision: Thursday, 12:45. European Central Bank president Mario Draghi has hinted at the possibility of further QE in December. The central banker explained that the ECB would continue to purchase £60bn ($92bn) a month in assets as part of its QE program, but that amount might increase. Draghi said that the asset-purchase plans are proceeding smoothly and continue to have a favorable impact in the market. Draghi also stated that the new macro-economic projections will be read by the ECB meeting in December and would enable the committee to undertake a review of its policy stance. There is speculation about a two-tier cut in the deposit rate, but the details are unclear. According to a recent poll, expectations stand at a 10bp cut in the deposit rate to -0.30% and an increase of €15 billion in QE, from ָָ€60 to €75 billion per month. There is potential for a surprise in the interest rate, the path of least resistance. Here is the full ECB preview: Short euro and long bunds opportunities.
10. US Unemployment Claims: Thursday, 13:30.  The number of Americans filing initial claims for unemployment benefits declined more than expected approaching to near 42-year lows as labor market conditions continue to tighten. The number of claims fell 12,000 to a seasonally adjusted 260,000 for the week ended Nov. 21. Economists expected a higher reading of 272,000. The four-week moving average of claims was unchanged at 271,000 last week. Continuing claims increased 34,000 to 2.21 million in the week ended Nov. 14. The four-week moving average of the so-called continuing claims rose 15,250 to 2.18 million. The number of weekly claims is expected to reach 269,000 this week.
11. US ISM Non-Manufacturing PMI: Thursday, 15:00. Service sector activity in the U.S. expanded at a faster rate than expected in October, raising optimism over the health of the economy and supporting a rate hike call in the coming months. The index rose to 59.1 points in October from 56.9 in September beating forecasts for 56.6. 14 non-manufacturing industries reported growth in October. Non-Manufacturing PMI is expected to reach 58.1 in November. This serves as a hint for the NFP.
12. US Non-Farm Payrolls: Friday, 13:30. Nonfarm payrolls increased 271,000 in October, rising sharply from 137,000 registered in August and September. The unemployment rate dropped to 5.0%. Average hourly earnings, jumped 9 cents, showing a monthly gain of 0.6% and an annualized increase of 2.5%. The average work week remained at 34.5 hours. The labor force participation rate reached 62.4%, though the decline in the total labor force slowed a bit. The Federal Reserve monitors the monthly number watching for clues about the strength of job creation and inflationary pressures, particularly from wage growth. A job gain of 201,000 is expected with  a 5% unemployment rate. Wages are expected to rise by 0.2% this time.
13. Canadian jobs report: Friday, 13:30. Canada enjoyed a gain of 44.4K jobs in October, much better than expected. This time, a small drop of 0.7K is expected. The unemployment rate is predicted to remain unchanged at 7%. Canada is showing signs of stability despite the fall of oil prices. Is it well based?

That’s it for the major events this week. Stay tuned for coverage on specific currencies

*All times are GMT.