Forex Signals Brief December 1: Will Powell End the Week With Hawkish Threats?
Yesterday the Chinese manufacturing and services PMI numbers were disappointing, showing that the second-largest economy on the planet hasn’t recovered yet. However, the talk for more stimulus kept the sentiment bullish during the Asian session until the European session started. The Euro turned out to be the weakest currency yesterday, driven by a weak Eurozone inflation report.
The US dollar made a strong reversal after some hawkish comments from FED’s Williams and Daly whoe are close to Powell, which was a minor surprise, but month-end flows could have had some impact as well. Markets are now expecting a rate cut in May, but that’s still far and there is still plenty of economic data to come until then.
The PCE inflation numbers and the unemployment claims figures were in line with expectations, while regional manufacturing remained solid. That was the highlight of the day, together with crude Oil which ended up down closing the day near $75. There were many OPEC leaks which induced volatility. OPEC decided to cut, but the cuts are ‘voluntary’ which the market didn’t really like, dumping crude Oil after all the confusion.
Today’s Market Expectations
Today starts with Caixin manufacturing numbers from China, which are expected to show a very slight improvement in activity, but remain in contraction. Although after yesterday’s disappointing manufacturing and services PMI, traders are more skeptical and a negative reading would add further to yesterday’s negative sentiment in financial markets. That will be followed by the Swiss GDP report which is expected to show a 0.1% expansion in Q3 after stagnating at 0.0% in Q2.
In the US session, we have the Canadian employment report, with the unemployment rate predicted to tick higher to 5.8% from 5.7% previously, with 14K jobs added versus 17.5K previously. The Bank of Canada is not expected to hike anymore, especially following last week’s inflation numbers, in which all inflation indices fell further and Governor Macklem maintained the central bank’s “wait and see” mode.
Later on, the US ISM Manufacturing PMI is predicted to rise to 47.6 points in November from 46.7 in October, which would still mean that this sector is in contraction for more than a year. Last Friday’s S&P Global US Manufacturing PMI missed expectations and fell back into recession, so traders are skeptical about this as well. Then FED chairman Jerome Powell will close the week, and trades fear some hawkish remarks before the end of the week, after some strong comments from other FOMC members yesterday.
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