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Last week recap
Last week recap
United States Dollar
The US wage growth held steady in November even as hiring slowed sharply, offering evidence that the labour market remains robust enough to justify at least one more increase in short-term interest rates by the Fed later this month with probabilities still holding around 70%. Non-Farm Payrolls came in at 155k, well under the expected 198k forecast.
The US stocks suffered on Friday following weaker economic data and Huawei’s story. The S&P dropped 2.3% and Nasdaq more than 3% while US Treasuries strengthened more than 1.5% across the curve with the US 10 Year closing below 2.85%.
The arrest of Huawei’s CFO has sparked concerns among US and Chinese executives, alarmed that they could be the next targets in the increasingly tense relationship between the two countries. Huawei’s CFO was detained in Canada last week following an extradition request by the US over allegations of violating sanctions around selling technology to Iran.
OPEC agreed to a significant production cut of 1.2 million barrels a day, which saw oil spike 1.6%. Oil linked currencies such as the CAD and NOK rallied. Canada employment numbers surprised to the upside with the unemployment rate falling to 5.6%, below market expectations of 5.8%.
Europe strike a tough bargain, think Brexit but also the Italian budget. The latest news and reports is that the European Commission have convinced Italy to limit its budget deficit to around 1.9%, a far cry from the 2.5% initially touted by Deputy PM Salvini. The chaos facing French President Emmanuel Macron has not spilled over into the markets yet whilst EUR/USD struggles to break thought the 1.14 barrier.
So it would appear that Emmanuel Macron the French President has decided to make a u-turn and suspend fuel tax rises that have led to violent protests across the country. In fact it was the Prime Minister Edourd Phillipe who announced the change in policy demonstrating the unusual nuances of European presidential politics.
It really is ‘out of the frying Brexit pan and into the Brexit fire’ at the moment for the government although this time it seems somewhat self-inflicted. Last Sunday Speaker of the House John Bercow said there was an ‘arguable case’ the government was in contempt following its decision not to release the full legal advice on Theresa May’s Brexit plan.
After the government was defeated on three fronts in the Commons on Tuesday, one such defeat meaning that MPs will be able to exert more influence by voting on what they want the government to do, some are theorising this could work in May’s favour; if her deal is rejected and amended, it could deliver a softer Brexit, meaning some Brexiteers may feel the PM’s deal is better.
Last week the Australia GDP was a thorough disappointment, following a 0.9% quarterly gain in June, GDP growth came in at just 0.3% in the three months to September. The primary catalyst for this deceleration in growth was attributed to a slowdown in consumption figures (aligned with the correction in Housing) and the impact of US-China trade saga
New Zealand Dollar
The New Zealand Dollar fell through trade on Wednesday, slipping toward 0.69 and touching intraday lows at 0.6893. With little of note on the domestic calendar the NZD took its cues from offshore sentiment and waning demand for risk as the afterglow of the Trump-Xi temporary armistice rapidly unwinds.
Despite slipping against the worlds base currency the NZD tested four month highs against the Australian dollar breaking above 0.95. The NZD has enjoyed a sustained period of upward momentum against the AUD through out the later half of the year after earlier estimates saw the antipodean cross headed for a break below 0.89 for the first time since March 2016.
The New Zealand dollar suffered a sharp decline through trade on Thursday as risk appetite softened with commodity currencies following bonds and equities lower, while safe haven stalwarts found support.
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