Daily Forex Fundamental Overview

Fundamental Analysis

EUR

“The public sector directly demands more goods and services to deal with the influx of refugees and the refugees themselves boost private demand as they also spend money in Germany. To sum up, the refugee influx has effects comparable to an unplanned economic stimulus program in the short run”

- Stefan Kipar, economist at Bayerische Landesbank

While the European economy has been struggling to solve the refugee crisis, a number of economists expect that inflow of around 800,000 people into Germany will boost the Euro zone’s biggest economy. Experts estimate that asylum seekers will contribute to German economic output growth, adding 0.2% of GDP next year and calming Volkswagen’s diesel emission scandal, which is expected to lower GDP growth by 0.03% in 2016. The German government predicts the Euro zone’s star economy to expand by 1.8% in real terms in 2015 and 2016, with domestic demand being an important driver for growth.

Meanwhile, sales at Italian retailers dropped in September, according to ISTAT. Italian retail sales slid 0.1% in the reported month from August, whereas measured on an annual basis consumer spending at retailers rose 1.5%. The Euro zone’s third biggest economy seemed finally finding its way out of the woods, albeit at a slow pace. After years of stagnation, growth is back, with the Italian economy expanding in the first two quarters. The International Monetary Fund in October revised its forecasts for 2015 and 2016 by 0.1 percentage point, to 0.8% and 1.3% respectively.

USD

“The trend in core capex orders is now clearly turning higher, following the collapse triggered by the rollover in oil companies' spending”

- Ian Shepherdson, Pantheon Macroeconomics

Orders for long-lasting manufactured goods rose in October following two months of weakness, while a key category that tracks business investment plans surged the most in three months. Orders for durable goods soared 3% last month, according to the Commerce Department, driven by an increase in demand for commercial aircraft. A key category that serves as a proxy for business investment spending climbed 1.3% in October, the best result since July, suggesting that the worst of the drag from a strong Greenback and deep spending cuts by energy firms was over.

At the same time, the number of Americans applying for jobless benefits declined more than expected last week, indicating that labour market conditions continued to tighten. Initial claims for state unemployment benefits declined 12,000 to a seasonally adjusted 260,000 for the week ended November 21, the Labor Department said. The preceding week data was revised to show 1,000 more applications were received than reported initially. Claims have now remained below the 300,000 threshold for 38 straight weeks, the longest stretch in years, and stayed close to levels last seen in the early 1970s. Claims below this level are usually associated with a resilient jobs market.

GBP

“Since 2010, no economy in the G-7 has grown faster than Britain”

- George Osborne, Chancellor of the Exchequer

Delivering the Autumn Statement and Spending Review, Chancellor George Osborne said the British economy is expected to expand by 2.4% this year. Moreover, growth for the next two years has also been revised up to 2.4% in 2016 and 2.5% in 2017. Osborne underlined the fact that since 2010 no economy in the G-7 group has expanded faster than the UK. Most importantly, the growth has been sustainable and has not been fuelled by an irresponsible banking boom. In his statement, the Chancellor said his economic plan for the next four years was about choosing priorities and insisted solving the "crisis" in home ownership is of a paramount importance. Osborne added that the four-year public spending plans were estimated to produce a surplus of 10.1 billion pounds by the end of the current parliament, which is more than he had projected in his budget speech in July.

This year, the Autumn Statement and the Spending Review are combined. The spending review shows how the British government will spend the 4 trillion pounds of taxpayers' money at its disposal. The Statement is one of the government's biannual updates to its plans for the UK economy.

NZD

“China is back as both our top export destination for goods, and our top source of imports”

- Nathan Penny, ASB rural economist

New Zealand’s merchandise trade shortfall widened slightly last month from a year earlier, as a precipitous decline in value of overseas shipments of milk powder affected exports. The country logged a NZ$3.24 billion deficit for the 12 months to October. The decline was led by a 29% decline in the value of milk powder exports as prices fell. Measured on a monthly basis, the trade gap narrowed from a revised NZ$1.14 billion in September to NZ$963 million, Statistics New Zealand reported. Exports dropped 4.5% year-on-year to NZ$3.83 billion in October, driven by a 29% plunge in milk powder. Dairy exports overall plummeted 18% last month compared with October a year earlier. China outperformed Australia and became New Zealand’s top annual export destination in October. Goods exports to China increased 9.2% to $678 million in October from the year earlier month, taking annual exports to the country to $8.41 billion. At the same time, exports to Australia plunged 8% to $754 million in the month, for an annual total of $8.36 billion.

Meanwhile, imports dropped 2.2% to $4.79 billion in October from the year earlier month, led by declines in petrol, avgas as well as capital goods.

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