After a slow start in the last week of the year, the U.S. dollar witnessed a sell-off as it endured a year-end portfolio adjustment and the ongoing tax bill approval. Weaker consumer confidence, jobless claims, and other less important news also contributed to the sell-off. The greenback lost ground against most currencies, except the commodity currencies. These currencies gained because of rising oil and commodity prices. In the first week of the New Year, the economic news/data scheduled to be released include the FOMC meeting minutes and the Non-Farm Payrolls, among others. A great deal of action can be expected as trading volumes pick up. Here is an outlook on some of the key data to be announced next week:
#1: U.K. Manufacturing PMI (01/02/2018 Tuesday 09:30 GMT)
In November, the IHS Markit/CIPS Manufacturing PMI for the U.K. rose to 58.2 after the reading for October was revised upward to the 56.6 level. The reading for November beat analysts’ expectation that the index will reach the 56.5 level and represented the tenth-best factory growth ever. Output, and new orders, as well as export orders, grew faster. The new orders for investment goods rose at the fastest rate since 1994 as the pound remained. Manufacturers maintain a positive outlook on capital spending, efforts to increase client bases, and improving market conditions. Forecast for December: 58.0
#2: U.K. Construction PMI (01/03/2018 Wednesday 09:30 GMT)
In November, the IHS Markit/CIPS Construction PMI for U.K. rose to 53.1 from 50.8 in the prior month. The reading for the month beat analysts’ expectation that the index will hit the 51.0 level. It pointed towards strong expansion since June in the construction sector. While the residential work grew, civil engineering and commercial activity declined. New orders recorded the highest increase in five months and employment grew at a faster pace. Business optimism rose from the near five-year low registered in October. As far as prices are concerned, cost inflation declined to lowest level in 14 months. Forecast for December: 53.2
#3: U.S. ISM Manufacturing PMI (01/03/2018 Wednesday 15:00 GMT)
The Manufacturing PMI reported by the Institute for Supply Management in the U.S. dropped to 58.2 in the month of November from 58.7 in the previous month. The reading for November came in below analysts’ expectation of the 58.4 level. The reading indicated slowing down of growth in manufacturing activity for the second consecutive month after hitting the 13-year high reading of 60.8 in the month of September. Employment, export orders, and inventories contracted. This forward-looking manufacturing sector survey report provides the first hint as to what can be expected in the Non-Farm Payrolls report scheduled to be released later in the week. Forecast for December: 58.3
#4: U.S. FOMC Meeting Minutes (01/03/2018 Wednesday 19:00 GMT)
The Fed releases the minutes of the FOMC meeting three weeks after the announcement of the Federal Funds Rate. In this statement, the Fed would provide details related to the meeting in December wherein the Fed raised interest rates as expected by the market. The Fed’s projection of three hikes next year was left unchanged. The surprise in the decision was Charles Evans joining hands with Neel Kashkari and opposing a hike. They will not be there as members in 2018 and hence the minutes is likely to reveal as to how much the prevalence of low inflation worries the Fed. Though Trump might nominate hawkish governors as permanent members, the point of view of the current members would certainly matter a lot. The absence of inflationary pressures, a cause for serious concern, and the “transitory” story might weigh on the U.S. dollar.
#5: U.K. Services PMI (01/04/2018 Thursday 09:30 GMT)
The services sector is the largest contributor to the U.K. economy and the release of the Services PMI data often triggers a great deal of volatility. In November, the IHS Markit/CIPS Services PMI for the U.K. disappointed by dropping down to the 53.8 level from the six-month high reading of 55.6 reported in the prior month. The reading also came in below analysts’ expectation of the 55.0 mark. This reflected moderate growth and indicated that it was a one-off increase in October. Managers’ expectation about Brexit will definitely shape the results and prospects in the future. Forecast for December: 54.1
#6: U.S. ADP Non-Farm Payrolls Data (01/04/2018 Thursday 13:15 GMT)
ADP’s Non-farm Payrolls report for jobs in the private sector showed that businesses in the U.S. hired as many as 190,000 workers in the month of November, down from 235,000 reported in October. The reading, however, was better than analysts’ expectation for an addition of 185,000 jobs. Forecast for December: addition of 192,000 jobs
#7: U.S. Unemployment Claims (01/04/2018 Thursday 13:30 GMT)
The number of American people filing for jobless benefits remained unchanged at 245,000 during the week that ended on December 23 from the reading for the previous month. The number of claims for unemployment benefits came in slightly more than the figure of 240,000 expected by the analysts. This the highest number of claims since the week ending November 11, even though the claims taking process continued to be disrupted in Puerto Rico and the Virgin Islands. Claims collection process has not yet returned to normalcy. Forecast for the next period: 244,000
#8: U.S. Crude Oil Inventories
In the U.S., crude oil stocks dropped by as many as 4.609 million barrels during the week that ended on December 22, following the 6.495 million barrels plunge in the prior period. The decline in stocks was much more than analysts’ expectations for a drop of 3.97 million barrels. With this, the crude oil stocks have declined for six weeks consecutively. In the meanwhile, the gasoline stocks rose by 0.591 million barrels after the 1.237 million barrels increase reported in the prior week. However, the reading came in below the market expectations for an increase of 1.278 million barrels.
#9: Australia Trade Balance (01/05/2018 Friday 00:30 GMT)
The trade surplus of Australia narrowed by as much as 93 percent to A$0.1 billion in the month of October from the downwardly revised surplus of A$1.60 billion for the prior period. The reading for October came in way below analysts’ expectations of A$1.4 billion trade surplus. This is the lowest trade surplus since the month of April. Exports dropped 3.0 percent from that for the previous month to A$31.87 billion, but imports rose by 2.0 percent to A$31.77 billion. For the period January to October, trade surplus was A$13.30 billion compared to the deficit of A$21.37 billion for the same period last year. Forecast for November: surplus of A$0.55 billion
#10: Eurozone CPI Flash Estimate (01/05/2018 Friday 10:00 GMT)
In the Eurozone, the consumer prices rose by 1.5 percent on a year-on-year basis in the month of November after the prices increased by 1.4 percent in the prior month. The figure for November matched with the preliminary estimate for the Euro area. While the energy prices increased at a quicker pace, food inflation slowed down a little bit. The annual core inflation – excluding the volatile food, alcohol, energy, and tobacco prices – remained at 0.9 percent, the five-month low reported for the month. Forecast for December: 1.4 percent
#11: Canada Employment Change and Unemployment Rate (01/05/2018 Friday 13:30 GMT)
Canada added 80,000 jobs in the month of November, which was well above analysts’ expectation that 10,000 new jobs will be added during the period. This is the largest increase in employment since the month of April 2012, as the manufacturing and trade sectors hired more people. The number of employees in the private sector rose by 72,000 but the number of employees in the public sector and those self-employed remained the same. Forecast for the month of December: a decline of 2,500 jobs
Meanwhile, Canada’s unemployment rate dropped to 5.9 percent in the month of November from 6.3 percent in the previous month. The reading for the month came in well below analysts’ expectation of 6.2 percent. This is the lowest unemployment rate in Canada since February 2008. Forecast for December: 6.0 percent
#12: Canada Trade Balance (01/05/2018 Friday 13:30 GMT)
The trade deficit of Canada dropped to C$1.47 billion in the month of October after the shortfall for the prior month was revised upward to C$3.36 billion. The reading for the month of October came in better than analysts’ expectation for a deficit of C$2.70 billion. Exports rose by 2.7 percent as sales to the United States increased. Imports declined by 1.6 percent because of lower motor vehicles and spare parts purchases. Forecast for November: a deficit of C$1.3 billion
#13: U.S. Average Hourly Earnings (01/05/2018 Friday 13:30 GMT)
In the U.S., the average hourly earnings of all the employees on the private nonfarm payrolls rose by 5 cents or 0.2 percent on a month-over-month basis to US$26.55 in the month of November. The reading for November came in slightly below analysts’ expectation for an increase of 0.3 percent. In the month of October, the average hourly earnings declined by 0.1 percent. On a year-on-year basis, the average hourly earnings rose by 64 cents or as much as 2.5 percent. Forecast for December: an increase of 0.3 percent
#14: U.S. Non-Farm Employment Change (01/05/2018 Friday 13:30 GMT)
The Non-farm payrolls report for the month of November showed an addition of 228,000 jobs, which was well above analysts’ expectation for an addition of 200,000 jobs. Employment continued to increase in business and professional services, healthcare, and manufacturing. For the month of December, the headline non-farm payroll increase is expected to be in the range of 189,000. The report for the last month of the year will provide a complete overview for the whole year, which has witnessed solid gains.
#15: U.S. Unemployment Rate (01/05/2018 Friday 13:30 GMT)
The unemployment rate in the U.S. remained unchanged at the 4.1 percent level in November from that for the prior month. The reading for the month was in line with analysts’ expectations as well. This is by far the lowest unemployment rate since February 2001. In the U.S., the number of people that are unemployed remained unchanged at the 6.6 million levels. On a year-on-year basis, the number of unemployed people and the unemployment rate dropped by 799,000 and 0.5 percentage point, respectively. Forecast for December: 4.1 percent
#16: U.S. ISM Non-Manufacturing PMI (01/05/2018 Friday 15:00 GMT)
In the U.S., the ISM Non-Manufacturing PMI for November dropped to 57.4 from 60.1 in the previous month, which represented the highest reading ever since August 2005. Analysts had expected the reading to come in at 59.0. However, the index points toward a strong growth in the non-manufacturing sector. It is expected to grow for the remainder of the year as well.
This report from ISM is more important as it relates to the larger services sector. However, as this report is released after the employment report, it does not provide any hint. Nevertheless, it moves the markets when it is released 90 minutes after the release of the non-farm payroll data. For the month of December, it is expected that the index will rise slightly to the 57.8 levels.