Weekly Outlook: December 3 - 7
This week markets are likely to welcome the ceasefire in the U.S.-China trade war, while awaiting fresh indications on the direction of U.S. monetary and an update on the health of the U.S. labor market.
The U.S. agreed not to increase the 10% tariffs on $200 billion worth of Chinese imports on Jan. 1 following talks between U.S. President Donald Trump and his Chinese counterpart Xi Jinping over the weekend.
The two sides will engage in new trade negotiations with the goal of reaching an agreement within 90 days. If no new agreement is reached in this time the 10% tariffs will be raised to 25%.
The trade spat between the world’s two largest economies has unnerved global financial markets and acted as a drag on global growth.
Federal Reserve Chairman Jerome Powell is due to testify about the economic outlook to Congress on Wednesday. Last week, Powell said interest rates were "just below" the neutral level, which markets took as an indication that the Fed could slow its program of hiking interest rates.
The Fed is widely expected to raise rates for a fourth time this year at its upcoming meeting later this month and has indicated that it may raise rates three more times in 2019, but markets are currently pricing in just one rate hike next year.
The U.S. non-farm payrolls report for November, scheduled to be published on Friday, is expected to show that jobs growth slowed while wage growth picked up slightly. An uptick in wage growth would help underline expectations for a December rate hike.
Markets will also be watching the progress of the Brexit deal debate in Britain’s parliament, which will determine the direction of the pound.
The dollar rose on Friday, buoyed by optimism ahead of the talks between the U.S. and China, with the U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, rising 0.44% to 97.12.
The euro was weaker, with EUR/USD down 0.67% to 1.1316 in late trade.
The dollar was a touch higher against the yen, with USD/JPY edging up 0.08% to 113.57.
The pound fell towards two-week lows amid mounting Brexit uncertainty, with GBP/USD down 0.3% to 1.2747.
Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.
Monday, December 3
Australia is to publish data on building approvals.
The UK is to release data on manufacturing sector growth.
A number of Fed officials are to make appearances, including Governors Richard Clarida, Randal Quarles and Lael Brainard, as well as New York Fed head John Williams.
The Institute of Supply Management is to release its manufacturing PMI.
Tuesday, December 4
The Reserve Bank of Australia is to announce its benchmark interest rate and publish a rate statement which outlines economic conditions and the factors affecting the monetary policy decision.
Bank of England Governor Mark Carney, along with other policymakers, is to testify about the Brexit Withdrawal Agreement before the Treasury Select Committee, in London.
Britain’s parliament will begin five days of debate on Prime Minister Theresa May’s Brexit plan, ahead of a critical vote on Dec. 11.
The UK is to release data on construction sector activity.
New York Fed head John Williams is to speak.
Wednesday, December 5
Australia is to release data on third quarter growth.
European Central Bank President Mario Draghi is to speak at an event in Frankfurt.
The UK is to release data on service sector activity.
Fed Chairman Jerome Powell is to testify about the economic outlook before the Joint Economic Committee of Congress, in Washington.
In the U.S., the ADP nonfarm payrolls report and the ISM’s non-manufacturing index will be released.
The Bank of Canada is to announce its latest interest rate decision and publish a rate statement.
Thursday, December 6
Australia is to release data on retail sales and trade.
Both the U.S. and Canada are to publish trade figures, while the weekly report on U.S. jobless claims will also be released.
BoC Governor Stephen Poloz is to speak about the economic outlook, risks in Canada's financial system, and the December interest rate decision at an event in Toronto.
Fed Chairman Powell is to speak at an event in Washington, while New York Fed head John Williams is to deliver remarks in New York.
Friday, December 7
Japan is to publish data on average earnings.
Canada is to publish its latest employment report.
The U.S. is to round up the week with the non-farm payrolls report for November.