European FX Outlook: Brexit deal, overshadows UK manufacturing ahead of NFP

What you need to know before markets open: 

  • German SPD and CDU are said to hold coalition talks on Wednesday.
  • Bitcoin madness continues taking the cryptocurrency up to $18,000.
  • With the UK and EU reaching a Brexit deal that enables Brexit negotiations to move on trade since 2018, the macro news the UK manufacturing in October will be overshadowed during the European morning session.
  • The US labor market report for November headlines Friday.

Friday’s market moving events

  • German trade balance is expected to reach a surplus of 21.8 billion EUR with exports rising 1.0% while imports rose 1.1% in October.
  • The UK industrial production is expected to remain flat in October while manufacturing output is set to rise 0.1% m/m in October after rising 0.7% m/m in September. See details in my preview here. 
  • NIESR UK GDP estimate is seen rising 0.4% in November.
  • The US Non-farm payrolls are expected to rise by 200K in November after 261K in October.
  • The US unemployment rate is seen remaining flat at 4.1% in November.
  • The US average hourly earnings are seen rising 2.4%^ y/y in November. Read details of NFP and ADP employment reports in my view here, while the market reaction is analyzed in Valeria’s preview here.
  • Michigan consumer sentiment indicator is expected to rise to 99.0 in December. 

Major forex market movers

  • Sterling is in center of all attention after the UK and EU Brexit deal.
  • The direction of the US Dollar is a function of expectedly solid NFP report on Friday that is seen paving the way for interest rate hike from Fed next week and three hikes in 2018.

Thursday’s macro summary

  • German industrial production unexpectedly fell by -1.4% m/m in October with Destatis revising September from -1.6% m/m to -0.9% m/m. Two consecutive months of negative growth is a source of concern, but analysts say it is because of unusually high number of public holidays and long weekends.
  • French trade balance reached a deficit of -5.0 billion EUR in October.
  • The second revision of Eurozone’s GDP confirmed the preliminary reading of 0.6% q/q increase while rising 2.6% over the year in Q3.
  • The US weekly initial jobless claims rose by 236K in the week ending December 1.
  • Canadian Ivey PMI decreased to 63.0 in November.
  • Canadian building permits rose for a second straight month, up 3.5% m/m in October to C$8.2 billion.
  • The UK and the European Union reached a deal to unlock Brexit negotiations, opening the way for trade talks eagerly awaited by businesses.
  • Congress averts U.S. government shutdown for now.

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