Daily Forex Fundamental Overview

Fundamental Analysis

Key highlights of the week ended November 18

US

November 9 brought two different kinds of news for the Russian economy. First, the latest World Bank forecast on the Russian internal indicators came to light, showing expectations for 2016 GDP growth still in the red zone with a 0.6% contraction, but estimating 2017 growth at 15% and 2017 growth at 1.7% respectively. The forecast is in line with Russia's Ministry of Economic Development, which predict a recession between 0.5% and 0.7%. In June, the World Bank set its estimates at a 1.2% fall in GDP, painting a much gloomier picture. Second, Donald Trump won what emerged to be a nasty election, getting hopes up for Russian investors. Interestingly, both of these news still give little to no certainty on what comes next for Russia.

EU

The single currency economy expanded in the third quarter, showing a 0.3% in the region's gross domestic product (GDP) on the previous three months and up 1.6% on a yearly basis. The figures were spurred by a rebound in smaller countries, including Portugal, which saw its fastest growth pace since 2013. During the last week, the European Commission cut its GDP forecasts for the euro area on advanced political uncertainty and weaker global trade. The EU expects the currency bloc to grow 1.7% this year and 1.5% in 2017, after climbing 2% in 2015.

UK

British consumer prices dropped unexpectedly last month, despite the steep fall in the value of the British Pound after the Brexit vote, official data showed on Tuesday. According to the Office for National Statistics, the Consumer Price Index advanced 0.9% year-over-year in October, compared to the preceding month's 1.0% rise. That was below the 1.1% market forecast, who suggested that the weak Sterling would lift inflation last month. Nevertheless, the ONS said factory gate prices increased 2.1%, faster than expected and the largest increase since April 2012. Furthermore, the Producer Price Index jumped 4.6% on a monthly basis in the reported month, after rising just 0.1% in the previous month, whereas economists penciled in an increase of 1.6%. Meanwhile, the Retail Price Index came in at 2.0% in October, unchanged from the same month one year ago. In addition, the ONS reported the so-called core inflation rate declined to 1.2% from September's 1.5%, falling behind analysts' expectations of 1.4%. UK inflation remained below the Bank of England's target of 2% for almost three years already. According to the Bank of England's latest inflation forecasts published earlier this month, UK inflation is expected to climb to 2.7% by this time next year.

China

Chinese industrial production grew less than expect last month, falling behind market forecasts and raising questions about the strength of recovery in the world's second largest economy, official figures revealed on Monday. According to the Chinese National Bureau of Statistics, the country's industrial activity advanced 6.1% on an annual basis in October, unchanged from the preceding month, while market analysts anticipated an acceleration of 6.2% during the reported month. Furthermore, retail sales that track private and government spending increased 10% year-over-year in October, while analysts expected them to remain unchanged at 10.7% last month. Further, China's fixed-asset investment rose 8.3%, compared to the same month one year ago, whereas economists expected an increase 8.2%, unchanged from the prior month. As in the preceding quarters, the Chinese economy expanded 6.7% in the Q3.

CAD

"This is indicative of an economy that's still sluggish and with excess slack".

- Jimmy Jean, Desjardins Capital Markets

Consumer prices advanced last month amid higher transportation and shelter costs, official figures revealed on Friday. According to Statistics Canada, the headline CPI rose 0.2% in October, following the preceding month's gain of 0.1%. On an annual basis, inflation grew 1.5%, after rising 1.3% in September and 1.1% in August. Both readings were in line with analysts' projections. Meanwhile, the so-called core CPI, which excludes the price of food and energy items, climbed 0.2% month-over-month in the same month, unchanged from September, while markets anticipated a slight increase to 0.3%. Year-over-year, core consumer prices rose 1.7%, below market consensus of 1.8%. Transportations costs jumped 3% in October, compared to the same month one year ago, driven by a 2.5% increase in the price of gasoline. The price of passenger vehicles increased 4.4%. Shelter costs grew 1.9%, whereas homeowners' replacement cost and electricity prices rose 4.1% and 5.3%, respectively. However, these increases were partly offset by a 0.7% decline in the price of food, 2.1% decrease in grocery store prices and 2.6% drop in restaurant prices. Last month, the Bank of Canada, which aims at 2% inflation, left its key interest rates unchanged but signaled further monetary stimulus is on the table.

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