Week Ahead Unveiled: FOMC, Earnings Reports, and Economic Indicators (Nov 20th-24th)

Economic

Traders' Opinions

Summary:

The upcoming week in the financial realm promises to be dynamic and eventful, with a plethora of key indicators and significant events shaping market trends globally.

As the financial landscape enters a new week, investors brace for impactful events and data releases globally. In the United States, attention is on FOMC meeting minutes, durable goods orders, and PMIs, while a plethora of earnings reports from major companies adds to the mix. Internationally, interest rate decisions and inflation rates take the spotlight in countries like Turkey, Sweden, South Africa, Canada, and Japan. Europe anticipates flash PMIs, with a focus on Germany's Ifo Business Climate, while the UK awaits the Chancellor's Autumn Statement. Meanwhile, China monitors PBoC actions, Japan observes October's inflation, and Southeast Asian nations unveil GDP and CPI figures. It's a week loaded with insights that will influence market trajectories.

The upcoming week in the financial realm promises to be dynamic and eventful, with a plethora of key indicators and significant events shaping market trends globally. Investors are gearing up for a mix of economic data releases, central bank decisions, and corporate earnings reports that will likely impact various asset classes.

United States: FOMC Insights and Earnings Reports

In the United States, all eyes are on the release of the FOMC meeting minutes on Tuesday. Investors are eager to glean insights into the Federal Reserve's future monetary policy directions, especially amid considerations of inflation deceleration and labor market dynamics. The economic calendar is brimming with notable releases, including durable goods orders and the flash S&P Global PMI survey. Expectations are set for a 3% decrease in new orders for durable goods in October, potentially reversing a surge from the previous month. Simultaneously, PMI data for November is anticipated to reveal moderate growth in service business activity and a marginal contraction in the manufacturing sector.

While U.S. markets will experience closures due to the Thanksgiving Day holidays, the week is not short on corporate revelations. Earnings reports from major companies such as Agilent, Zoom, Nvidia, Lowe’s, Analog, Dell, Autodesk, HP, Dollar Tree, Best Buy, and Deere & Company will provide insights into the performance and outlook of key sectors.

Canada: Inflation, Retail Sales, and New Home Prices

North of the border, Canada takes the spotlight with updated data on the inflation rate, retail sales, and new home prices. These releases will be closely watched for their implications on economic health and potential policy considerations.

Europe: Flash PMIs and Economic Indicators

In Europe, attention shifts to flash PMI releases that will offer insights into overall business activity. Modest declines are expected in Euro Area, Germany, and France, with both manufacturing and services output contracting at slower rates. Germany's Ifo Business Climate is projected to reach a five-month high in November, providing a gauge of business sentiment. Other key economic indicators include the final reading for Germany's Q3 GDP, producer prices, business and consumer sentiment in France and Turkey, and Switzerland's trade balance. Interest rate decisions are on the horizon for Sweden and Turkey.

United Kingdom: Chancellor's Autumn Statement and Economic Data

In the United Kingdom, the Chancellor of the Exchequer is set to present the 2023 Autumn Statement on November 22. The economic calendar includes flash PMIs, GfK Consumer Confidence, CBI industrial trends orders, and public sector net borrowing. The manufacturing and services sectors in the UK are expected to contract at a milder pace, aligning with trends in other European countries.

Asia: Central Bank Actions and Economic Metrics

Turning to Asia, the People's Bank of China (PBoC) is expected to maintain its loan prime rates unchanged, with markets closely monitoring any potential moves. Japan awaits October's inflation print, influenced by currency dynamics, which could impact the Bank of Japan's policy stance. Southeast Asian nations, including Thailand, Indonesia, Malaysia, and Singapore, are poised to unveil GDP and CPI figures, offering insights into regional economic performance.

As the week unfolds, participants in the financial markets will navigate through a sea of information, reacting to developments and adjusting strategies based on the multifaceted indicators and events. The interplay of economic data, central bank decisions, and corporate earnings will contribute to shaping market sentiment and influencing investment decisions globally.

To stay updated on all economic events of today, please check out our Economic calendar

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Forex

The AUD/USD has this afternoon surged to a three-month high at .6563, as the U.S. dollar extended its post-CPI decline.

The U.S. dollar index (DXY), faced its poorest performance since mid-July last week. The unexpected dip in the October CPI report led to U.S. rates markets anticipating rate cuts. By July 2024, 50 basis points of Fed rate cuts are priced, with 100 basis points priced for the entirety of 2024.

In contrast, last week's Australian labour force report was robust, and has raised expectations the RBA will need to hike rates early in 2024 to continue to cool the economy, and to bring inflation back to target within a reasonable time frame.

RBA vs. Fed outlooks: Australian robustness and U.S. economic softness favour AUD/USD

An extended run of resilient Australian data, up against a run of softer U.S. economic data, has shifted the respective outlooks of the RBA and the Fed (central bank divergence) in favour of the AUD/USD. Whether that run will be extended will depend on two key local events this week. The first is the release of the RBA meeting minutes from the October meeting, and a speech by RBA Governor Michele Bullock on Wednesday evening at the ABE Annual Dinner in Sydney.

What to expect from the RBA meeting minutes?

The minutes from the Reserve Bank meeting in November are scheduled to be released tomorrow, at 11.30 a.m. At its meeting in November, the RBA raised its official cash rate by 25bp to 4.35%. It was the RBA's first rate rise since June, and was widely expected.

The catalyst for the rate hike was an upgrade in the RBA's inflation forecasts to 3.5% from 3.3% by the end of 2024; and for inflation to be at the top end of the target range of 2-3% by the end of 2025.

“The Board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe.”

While the RBA retained its tightening bias, it was watered down, providing a dovish element to the rate hike.

From

"Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve."

"Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks."

The board's meeting minutes are expected to reiterate the sentiments outlined above. They will be closely scrutinised around what options the board considered, the factors that would prompt the RBA to act on its tightening bias, and what factors might see the RBA move back to the sidelines.

AUD/USD technical analysis

After four prior rejections of the .6520/30 resistance area, we are encouraged by today's price action. However, as we noted in previous reports to confirm a trend reversal, we need to see a sustained break above resistance at .6520/30.

Should the AUD/USD still be trading above the .6520/30 resistance level after tomorrow's RBA meeting minutes, we expect the currencies to extend its gains to the 200-day moving average at .6592.

Should it then see a sustained break above the 200-day moving average at .6592, we look for the AUD/USD to rally towards the next important layer of resistance at .6800/20.

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Thomas

Palestinian-Israeli conflict

Latest news on the Israeli-Palestinian conflict

0:03

Houthi armed forces statement: In support of the oppressed people of Gaza, the navy of the Yemeni Armed Forces, with the help of Almighty God, conducted a military operation in the Red Sea, which resulted in the seizure of an Israeli ship and its taking to Yemen coastal.

The Yemeni Armed Forces are dealing with the crew in accordance with the teachings and values of our Islamic religion.

The Yemeni Armed Forces once again warned all ships belonging to or dealing with enemies of Israel that they would become legitimate targets for attacks by the Houthi armed forces.