Weekly Currency News: U.S. Dollar, boosted by Tax Bill approval
The dollar has shrugged off previous weakness and opened the week at a strong pace after the approval of the Tax Bill in the U.S. Senate over the weekend. The market is confident that corporate tax cuts will foster economic growth and push bond yields higher.
The euro has pulled back from 1.1900 area, while the pound retreated from two-month highs with investor cautious ahead of the meeting between May and Junker today, which might set the path to the next phase of the Brexit negotiations.
Apart from this meeting, this week we will be very attentive to the U.S. Non-Farm Payrolls report which might have a relevant impact on Dollar volatility and other events like the monetary policy decisions by the Bank of Canada and the Reserve Bank of Australia, or the Eurozone GBP data.
Currencies last week
- EUR/USD pulling back from 1.1900
- GBP/USD: surges to 1.3500 on Brexit Bill agreement
- EUR/GBP: support at 0.8800 area
- USD/JPY surges to 113.00 on Tax Bill progress
Main events this week:
The calendar opens on Tuesday with the U.S. Factory Orders, a leading indicator of inflation and manufacturing activity, which is expected to have eased somewhat in October. Factory orders tend to have a low to moderate impact on the dollar.
The main event in the U.S. calendar will be the U.S. Non-Farm Payrolls report, and the average weekly earnings, due on Friday. After the approval of the tax bill, a strong employment report will support Fed’s plan to hike rates one week later, n December the 13th and therefore, it might add buying pressure on the dollar.
In the Eurozone calendar, the focus will be on the final reading of Q3 Gross Domestic Product data, on Thursday. According to preliminary estimations, Eurozone economy grew at a 2.5% annual pace in the quarter. Revisions to that reading might have some impact on the euro.
On Thursday investors will be attentive to ECB president Mario Draghi’s speech. His comments about inflation, the Eurozone economic outlook and especially the bank´s plan to remove the monetary stimulus might move the euro.
In the UK calendar, the main event will be the release of the manufacturing and the industrial production data. The Manufacturing PMI Index pointed out to a pick up in factory activity in November. A strong increase in manufacturing activity would improve the perspectives of UK economy and might strengthen the pound.
In the Japanese calendar, on Thursday the Cabinet Office will release the final reading of the Q3 Gross Domestic Product. Previous estimations point out to a 1.4% yearly advance (after the 2.5%growth on the previous quarter). Revisions to those figures might have some impact on the yen.
On Tuesday, we will be attentive to the Reserve Bank of Australia’s monetary policy decision. In the last statement, the bank downgraded the country’s growth outlook, which practically discards any interest rate hike in the foreseeable future. In this context, only an unlikely turn of the bank’s “wait-and-see” stance would have a relevant impact on the Aussie.
On Wednesday, the Bank of Canada will be observed with interest. After two rate hikes in the last six months, the bank is expected to leave rates on hold thus, the interest will be on the tone of the ensuing statement to assess the trends of the bank’s near-term monetary policy.