The economic damage from the COVID-19 pandemic knocked back sentiment at the end of a grand November for markets undermining safe-havens.
The prospect of a vaccine-driven economic rebound next year and hopes for further stimulus eclipsed coronavirus immediate concerns.
Investors paused ahead of crucial economic indicators later this week to take stock of what was set to be a record-setting month.
The U.S. election has distracted lawmakers from passing fiscal aid package. So, investors have begun to expect that the Fed will step in at their next meeting in December. Investors are watching for clues as to the central bank’s thinking and the broad shape of the economy recovery.
Biden and Vice President-elect Kamala Harris were set to receive their first classified presidential daily briefing on Monday. This is the first step toward the transfer of responsibility for the most sensitive intelligence to a new administration.
Focus will also be on the monthly US employment report. November is likely to be the seventh straight month of US jobs gains, but expectations are that only 520,000 jobs were added.
Britain and the European Union are heading into a “very significant” week. With five weeks left of a transition period before Brexit, markets anticipate a deal can be struck. However, there are serious differences yet to be resolved. Both sides are calling on the other to compromise over fishing, state aid and how to resolve any future disputes.
After face-to-face talks restarted on Saturday, investors await news of a call between UK Prime Minister and EU Commission president.
START TRADINGVaccine optimism still a mover – PMIs, GDP and Job data eyed
Testimony from Fed chair before Congress as well as U.S. labour market data this week will be closely watched. Other highlights include PMIs as well as GDP reports in Canada and Australia. The week ends with US nonfarm payrolls, which is a market-mover.
- Later in the day (30.11), investors are awaiting European inflation data, and a speech from European Central Bank President Christine Lagarde.
- Euro zone consumer prices are likely to have fallen further in November. A 0.3% year-on-year drop is expected from Tuesday’s “flash” reading (01.12). On the same day, investors are watching for UK Manufacturing PMI and US Manufacturing PMI. Canada GDP and Canada Employment Report will wrap up a day full of events.
- On Wednesday (02.12) investors will focus on the RBA Decision and the Australian GDP. Australia’s economy fell by 7.0% in Q2, as Covid-19 was responsible for a sharp economic downturn. The economy will probably rebound in Q3, with an estimate of 2.4%.
- On Friday (04.12), the US Employment Report (Nonfarm Payrolls) will watch for clues as to the broad shape of the economy recovery. Nonfarm payrolls have been falling, and the trend will probably continue, with an estimate of 500 thousand.
Follow this week’s economic calendar.
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Nervousness about of new infections and fresh lockdowns across Europe and the US have provided some support to safe-haven currencies. Global market sentiment rally this month prompted the dollar to fall and riskier currencies to strengthen.
EUR/USD recorded strong gains last week, climbing close to 1%. The euro is up 2.8% for the month. The dollar is set to log its largest monthly fall since July, having wiped 2.5% off its value. A combination of vaccine optimism and bets on more monetary easing drove investors out of the world’s reserve currency. The dollar index has dropped about 2.5% in November, nearly 11% below a March peak of 102.990.
GBP/USD showed little movement last week. Sterling is up nearly 3% on the dollar this month. Brexit negotiations remain the focus for the pound. Investors wager a Brexit deal will be brokered even as the deadline for talks loomed ever larger. Also, Weakness in the U.S. dollar amid thin trading due to the Thanksgiving holiday bolstered sterling.
USD/JPY settled down and showed limited movement last week. The Japanese yen has gained a little over 0.5% through November as the pandemic death toll climbed towards 1.5 million people.
AUD/USD jumped 1.0% last week and reached a high of 0.7399, its highest level in three months. The Australian dollar is up more than 5% for the month.
The Canadian dollar enjoyed a strong week, as USD/CAD dropped close to one percent. The pair ended the week below the symbolic 1.30 level, the first time that has occurred since September 2018. The loonie has posted strong gains in November. With investor sentiment towards the US dollar at low levels, the Canadian currency could make further inroads.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, CNBC, BBC, The Guardian