Week starting 04-12-2023
We have excluded the Russian Ruble from the analysis in our report due to the extreme volatility associated with the currency.
USD
- Last week, the US Dollar weakened against 13 of the top 19 currencies we monitor. The most notable losses were against the New Zealand Dollar (NZD) (-1.60%) and the Japanese Yen (JPY) (-1.26%), whilst the largest gains were against the Euro (EUR) (0.77%) and the Polish Zloty (PLN) (0.46%).
- On 29 November, the US released its second estimate of the GDP growth rate for Q3, surpassing expectations at 5.2%, signalling robust economic expansion. Notably, this exceeded both the previous quarter's 2.1% and the consensus forecast of 5%. On Thursday, the core PCE price index for October, the Federal Reserve's preferred inflation metric, met expectations at 0.2%, showcasing stability in inflation levels. The synchronised uptick in GDP growth above expectations and core PCE in line with predictions suggests effective measures in curbing inflation. This alignment has heightened market expectations of a possible rate cut early next year.
- This week's focus is primarily on key US labour data releases. On Tuesday, attention is on the ISM services PMI for November, with a consensus forecast of 51.5, slightly below the previous month's figure. Concurrently, the JOLTs job openings for October are anticipated to be 9.4 million, aiming to maintain a strong labour market. By Friday, market watchers eagerly await the nonfarm payrolls (NFP) for November, expecting 160,000 jobs, slightly below the previous month. The NFP report has been a critical focus to traders as it gives an indication as to how the employment picture in the US is changing and one should keep a close eye on this release.
EUR
- Last week, the Euro weakened against 18 of the top 19 currencies we monitor. The largest moves to the downside were against the NZD (-2.38%) and the JPY (-2.05%), whilst the only gain was against the Indonesian Rupiah (IDR) (0.25%).
- During the week of 27 November to 4 December, key events unfolded in the Eurozone (EA) with notable attention on inflation data. The inflation rate year-on-year flash for November came in at 2.4%, below both the previous rate of 2.9% and the consensus forecast of 2.7%. Similarly, the core inflation rate year-on-year flash for November registered at 3.6%, below expectations. This lower-than-expected inflation aligns with the European Central Bank's (ECB’s) objectives of achieving a moderate and stable inflation rate. The possibility of an earlier rate cut by the ECB is hinted at by this data, distinguishing its stance from some of the other major central banks.
- This week in the Eurozone, economic indicators include a speech by ECB President Lagarde on Monday, providing insights into the central bank's perspective. On Tuesday, attention turns to the final reading of the HCOB services PMI for November, with a consensus forecast of 48.2, indicating the state of the services sector. The retail sales month-on-month data for October will be released on Monday, with a forecast of 0.3%. On Thursday, the focus shifts to the third estimate of the GDP growth rate for Q3, both quarter-on-quarter and year-on-year, providing crucial insights into the overall economic performance. Quarter-on-quarter growth is expected to contract, which would add further weight to calls for the ECB to cut interest rates sooner rather than later.
GBP
- Last week, the British Pound strengthened against 14 of the top 19 currencies we monitor. The most impactful gains were against the EUR (1.15%) and the Brazilian Real (BRL) (0.98%), whilst the greatest losses were against the NZD (-1.21%) and the JPY (-0.88%).
- There were limited data releases from the UK last week. The Bank of England's (BoE’s) Haskel delivered a speech on Tuesday, contributing to the market's understanding of the central bank's perspective. On Wednesday, the BoE consumer credit for October was ￡1.289 billion, slightly below the previous month but in line with the consensus. Additionally, the S&P Global/CIPS manufacturing PMI for November posted at 47.2, signalling a contraction but surpassing both the previous month's figure and the consensus forecast. Overall, the data points were not vastly interesting, but the general market consensus is that the BoE will keep rates higher for longer, hence the solid GBP performance last week.
- This week, we will mainly look to see if the rally in the GBP will hold. On Tuesday, the BRC retail sales monitor year-on-year for November is anticipated, with a consensus forecast of 2.7%, following the previous month's 2.6%. Simultaneously, the final reading of the S&P Global/CIPS services PMI for November is expected to come in at 50.5, maintaining stability in the services sector. Wednesday, BoE Governor Bailey is scheduled to deliver a speech, providing further insights into the central bank's outlook and potential policy considerations. We look to see if his speech indicates the BoE will keep rates higher for longer, which would prop up the Pound.
ZAR
- Last week, the South African Rand weakened against 11 of the top 19 currencies we monitor. The most significant losses were against the NZD (-1.55%) and the JPY (-1.22%), whilst the greatest gains were against the EUR (0.82%) and the PLN (0.51%).
- The South African Rand experienced a week of mixed performance, influenced by various global factors that overshadowed its local dynamics. The ZAR found support from higher gold prices. However, Thursday brought negative surprises as the trade balance for October printed at R12.66 billion, falling short of both the previous month's R11.97 billion surplus and the consensus forecast of R9.05 billion. This unexpected deficit had a notable impact on the currency. On Friday, the ABSA manufacturing PMI for November showed a slight improvement at 48.2, indicating a tentative recovery in the manufacturing sector. Overall, the ZAR faced a week of volatility, with global factors and trade balance concerns influencing its performance.
- This week, South Africa is bracing for impactful economic releases that could significantly influence the nation and its currency. Tuesday's anticipated S&P Global PMI for November, projected at 48.4, suggests a potential contraction in the private sector. The primary concern centres around the GDP growth rate for Q3, expected to contract -0.2% (QoQ) and -0.3% (YoY), signalling economic challenges. This contraction may intensify pressure on the South African Reserve Bank (SARB) to consider interest rate cuts for stimulating growth. However, the SARB faces a delicate balancing act as recent inflation upticks necessitate caution. These developments highlight the economic headwinds confronting South Africa, with significant implications for its currency.
AUD
- Last week, the Australian Dollar (AUD) strengthened against 16 of the top 19 currencies we monitor. The largest gains were against the EUR (1.58%) and the PLN (1.27%), whilst the most notable moves to the downside were against the NZD (-0.80%) and the JPY (-0.47%).
- In the Australian economic landscape this week, attention was particularly focused on the consumer price index (CPI) released on Wednesday, which came in lower than expected at 4.9%, below the consensus forecast of 5.2%. Additionally, the AUD found support from higher gold prices and favourable global conditions. Housing credit month-on-month for October recorded a modest increase at 0.4%. Wrapping up the week, the Judo Bank manufacturing PMI final for November posted at 47.7, in line with expectations. These releases collectively reflect a nuanced economic picture for Australia, with the currency being influenced by both domestic and global factors.
- This week, market attention in Australia is keenly directed towards the Reserve Bank of Australia’s (RBA’s) interest rate decision scheduled for Tuesday. While the consensus anticipates the RBA will maintain the current rate at 4.35%, any unexpected changes could lead to substantial market volatility. On Tuesday, the Judo Bank services PMI final for November is expected, providing a snapshot of the services sector. Wednesday brings the GDP growth rate figures for Q3. Both quarter-on-quarter and year-on-year are highly anticipated. Thursday's balance of trade for October will round off the week, offering a comprehensive overview of Australia's economic performance. The RBA's interest rate decision remains a focal point, and any surprises in this regard could significantly impact market dynamics.
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