XM - Analytics


567.50 7.00/10
70% of positive reviews

Week Ahead – Bank of England and RBNZ meet; Japan GDP could get revised to positive growth

Central Bank meetings will continue into next week with the Bank of England and the Reserve Bank of New Zealand holding their respective policy meetings. Also to watch out next week are the Chinese trade data and Japanese GDP revision, which could show Japan avoided technical recession in the third quarter.

German industrial production data will start the week on Monday. Industrial production is expected to rebound in October, and is forecast to rise by 0.7% m/m after shrinking by over 1% in the previous two months. This follows strong factory orders numbers this week, pointing to a rebound in the country’s factory output after a summer slump. Revisions to third quarter Eurozone GDP readings will be the only other major data coming out of the Eurozone. Third quarter GDP in the euro area is expected to stay unrevised at 0.3% q/q in the second estimate of GDP growth when released on Tuesday. A surprise upward revision – though unlikely – would fuel the euro even higher following this week’s smaller-than-expected stimulus by the ECB.

An upward revision to Japan’s GDP is not as improbable however, and third quarter growth is forecast to be revised up to an annualized rate of 0.1% from -0.7% in the preliminary estimate. If growth comes in positive on Tuesday, it means Japan did not enter technical recession in the third quarter as initially thought. Also out the same day are current account figures for October, which are expected to show a widening surplus.

Important data out of China next week will include the November trade and inflation numbers. Both exports and imports are expected to continue on their downward path but at a slower rate. Exports are forecast to drop by 5% y/y from 7% the prior month, while imports are expected to decline by 12.6% y/y from 18.8%. Inflation in China is forecast to edge up 0.1% to 1.4% in November, which still gives the People’s Bank of China plenty of room for further cuts to help revive manufacturing output, which remains sluggish.

The US will have a quieter week with November retail sales being the main focus for US data. Retail sales numbers out on Friday are expected to show a rise of 0.3% m/m. This would be an improvement on October’s 0.1% reading and could end three straight months of disappointing sales figures. There have been other signs of a soft patch in US consumer spending. The University of Michigan confidence survey disappointed in both October and November in the final readings. It is forecast to worsen slightly to 91.0 in December from 91.3 when released on Friday.

In the UK, the latest manufacturing and industrial production figures for October should be interesting to watch on Tuesday following a strong October manufacturing PMI. Manufacturing and industrial production are forecast to increase by 0.1% y/y and 1.3% y/y respectively. If manufacturing comes within estimates, it would be the first positive year-on-year growth since June. However, the figures are unlikely to make much of an impact to Thursday’s interest rate decision by the Bank of England. No change is expected in monetary policy when the Bank meets on Wednesday and Thursday. The Bank is likely to stand pat on monetary policy until after the Fed has raised its own rate and there are more concrete signs of inflationary pressures picking up in the UK economy.

Finally, the Reserve Bank of New Zealand will also hold its monetary policy meeting on Thursday and it’s widely expected to cut rates to 2.5% from 2.75%. This would make it the fourth cut this year as the central bank looks to ward off recent gains in the kiwi’s exchange rate and support the country’s exporters from the ongoing global slump in dairy prices.

Risk Warning: Forex, Commodities, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you fully understand the risks involved and do not invest money you cannot afford to lose. Please refer to our full Risk Disclosure.

To leave a comment you must or Join us

By visiting our website and services, you agree to the conditions of use of cookies. Learn more
I agree