E8 Funding presents a comprehensive market overview to keep you abreast of the latest developments on the economic front.
Last Week’s Spotlight: Canada and Australia Maintain Interest Rates, Surprising NFP from the US
Australia’s RBA Holds Rates Steady, Aligning with Expectations
The Reserve Bank of Australia (RBA) opted to maintain its interest rates, conforming to market expectations. This decision affords the RBA additional time to assess economic conditions before contemplating further tightening in the coming year. Diverging from the expected easing trends in the U.S. and Europe, the RBA retained rates at the 12-year peak of 4.35%. The decision, following a quarter-point hike in November, aligns with the bank’s expectations, with economic indicators meeting forecasts.
Alongside the interest rate decision, the Australian Bureau of Statistics unveiled updates on GDP growth and international trade. Australia’s Q3 2023 GDP grew by 0.2% QoQ, slightly below market expectations. Contributing factors include a slowdown in fixed investment growth, a pause in household consumption, and a negative contribution from net trade. The Australian dollar experienced fluctuations against the New Zealand dollar on the day of the interest rate decision, prompting speculation on future trends in the AUD/NZD pair.
Bank of Canada (BoC) Maintains Interest Rate at 5%, in Line with Expectations
In a similar vein, the Bank of Canada (BoC) opted to keep its key interest rate steady at 5%, aligning with market expectations. This marks the third consecutive maintenance, signaling a pause in rate hikes as the economy no longer exhibits excess demand. While concerns about inflation persist, the BoC notes a visible softening in the labor market and acknowledges that elevated interest rates are curbing spending. Despite market speculation, Governor Tiff Macklem emphasized that the BoC is not currently considering monetary easing.
NFP Beats Expectations
Following these decisions, the U.S. economy witnessed a surge in job additions, with 199,000 jobs added in November, surpassing predictions. The private sector saw a notable increase, accompanied by a rise in average earnings. Despite initial market reactions, subsequent trends indicated a reversal in some movements.
China’s Consumer Prices Fall Fastest in 3 Years
China faced a significant 0.5% YoY decrease in its Consumer Price Index (CPI) in November, marking the steepest decline since the peak of the pandemic three years ago. This accelerated deflation raises concerns for Beijing, prompting calls for intervention to stimulate demand and avert a prolonged deflationary cycle.
This Week’s Outlook: Central Banks in Focus
As we embark on a new week, expect potential market volatility, particularly if outcomes deviate from expectations. Central bank meetings take center stage, with press conferences and speeches likely holding greater influence on market dynamics than interest rate decisions.
Monday, December 11th, 2023
No significant data releases are scheduled during the day. Later in the evening, watch for a speech by the Reserve Bank of Australia’s Governor Michele Bullock and the release of the Westpac-Melbourne Institute’s report on Australian consumer confidence.
Tuesday, December 12th, 2023
After midnight, the National Australia Bank (NAB) will release its business confidence index survey. Subsequently, the UK labor market figures will be disclosed, along with Germany and Eurozone’s ZEW Economic Sentiment Index. The U.S. Inflation Rate, a crucial metric, will be announced in the afternoon, setting the stage for potential market movements.
Wednesday, December 13th, 2023
Wednesday features UK GDP, Industrial Production, and International Trade data, followed by the U.S. Bureau of Labor Statistics’ Producer Price Index figures. The Federal Reserve’s interest rate decision in the evening is a highlight, with a focus on the accompanying economic projections and press conference.
Thursday, December 14th, 2023
Thursday kicks off with labor market data from Australia and the Swiss National Bank’s announcement. The Bank of England (BoE) and European Central Bank (ECB) are also expected to make interest rate decisions, adding to the day’s central bank focus. U.S. Retail Sales figures and additional labor market data will be released, culminating in ECB President Christine Lagarde’s speech.
Friday, December 15th, 2023
Friday sees the release of PMI figures from various regions, including Japan, China, France, Germany, and the Eurozone. Europe’s international trade data will be disclosed, alongside remarks from Bank of England (BoE) member Dave Ramsden. The week concludes with minor U.S. data and a speech by Bank of Canada (BoC) Governor Tiff Macklem.
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