European FX Outlook: Solid growth for Eurozone

What you need to know before markets open: 

  • The ADP private employment report showed 190K new jobs were created in the US in November indicating solid NFP reading on Friday and paving the way for Fed to hike rates next week.  
  • The UK government is facing tensions from within the government and her Conservative party. Conservative hardliners Boris Johnson and Michael Gove are pushing Prime Minister May into the corner with hard Brexit stance while Northern Ireland’s Democratic Unionist Party that forms a thin majority government with Conservatives resists current Irish border set up after Brexit.
  • House and Senate lawmakers plan to begin working this week on compromise tax-overhaul legislation 
  • The Bank of Canada stressed cautious approach in monetary tightening saying “while higher interest rates will likely be required over time, Governing Council will continue to be cautious.”
  • Bitcoin is on the run reaching 14,000, up 40% in December.

Thursday’s market moving events

  • German industrial production is expected to rise 1.1% m/m in October while accelerating to 4.3% over the year.
  • French trade balance is seen reaching a deficit of -4.6 billion EUR.
  • The second revision of Eurozone’s GDP is set to confirm the preliminary reading of 0.6% q/q increase while rising 2.5% over the year in Q3.
  • The US weekly initial jobless claims are expected to reach 240K in the week ending December 1.
  • New York Fed President William Dudley is scheduled to speak at the "Higher Education Financing and Costs and Returns of Higher Education" event in New York at 13:30 GMT. 
  • Canadian Ivey PMI is seen stable at 63.5 in November.
  • Canadian building permits are expected to rise 1.5% m/m in October.
  • The ECB President Mario Draghi participates as chair of the Group of Governors and Heads of Supervision (GHOS) in a press conference by the Bank for International Settlements, hosted at the European Central Bank in Frankfurt at 16:00 GMT.
  • Japan’s Q3 GDP is seen rising 0.4% q/q while growing 0.1% over the year.

Major forex market movers

  • The EURUSD fell below $1.1800 level for the first time since November 22.
  • The CAD was a loser of the day falling 140 pips after the Bank of Canada reasoned its decision to hold rates unchanged by 

Wednesday’s macro summary

  • German factory orders rose 0.5% m/m in October while rising 7.0% over the year.
  • The Eurozone retail PMI rose to 52.4 in November from 51.1 in October with sales growing on an annual basis.
  • ECB Executive Board member Yves Mersch said that if the monetary stimulus is removed prematurely and too quickly, asset prices could collapse and yields rise sharply with the ECB aware that the longer the program lasts, the greater the risks. In his opinion, it will no longer be necessary to buy assets as a result of existing forces in due course.
  • The UK Brexit Minister Davis said the UK government decided to leave the European Union’s customs union without first undertaking a quantitative assessment of the impact of such a decision. 
  • The US ADP private employment increased 190K in November, indicating that the Labor Department’s report due this Friday is to come with a reading of about 200K, paving the way for Fed to hike rates next week.
  • Labour productivity of Canadian businesses fell 0.6% q/q in the third quarter, after edging down 0.2% in the second
  • The US labor market productivity rose a revised 3.0% q/q during the third quarter while unit labor costs at the same time decreased 0.2% q/q.
  • The Bank of Canada left policy rate unchanged at 1.00% in December stressing cautious approach to monetary tightening.
  • EIA crude oil inventories fell -5.6 million barrels.

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