A December to remember: Interest rate decisions and more


30 November, AtoZForex.com, Lagos – As we step into a new month, it can be argued that December will be the most important month of the year, considering the level of important fundamentals scheduled for release. Key monetary policy decisions to be made by the Federal Reserve and the European central bank keep the EURUSD pair high on the radar. Many analysts expect the divergence in policy decisions to be a catalyst for the long awaited Euro dollar parity, with the pair currently trading close to the year’s low.

The new week comes with the new month, bringing along lots of high impact news releases like Australia, Canada and Eurozone interest rate decisions, UK’s Bank stress test results, the speech from Fed chair Yellen, the non-farm payroll report and so on. Also, not forgetting the International Monetary Fund’s important decision as to whether the Yuan will be included in the Special drawing rights (SDR) currency basket. All these are expected to bring strong volatility and momentum to the markets.

IMF decision on Yuan

So far so good, the Chinese government has taken the necessary steps to satisfy the criteria for inclusion in the elite basket of SDR currencies, potentially joining the likes of the US dollar, Euro, Pound and the Yen in this group. The IMF is expected to vote for the yuan’s inclusion today (Monday), which will strengthen the currency and ultimately China’s influence in the global economy. It may not have a huge immediate impact, but in the long run, will be a contributing factor in opening up China’s capital markets.

Australia Cash Rate

Having cut rate twice this year, the Reserve Bank of Australia has so far ignored calls for further reduction of the cash rate, which is already at record lows. In the last RBA statement, Gov. Stevens sounded upbeat on the country’s economic outlook, clarifying that economic conditions had “firmed a little” in the past few months. Although leaving the door open for further rate cuts, such a decision will be largely dependent on inflation and other key fundamentals.

On Wednesday, we have the country’s quarterly GDP, which has been forecast to show a 0.7 percent growth in economic activities. We also have the trade balance and retail sales scheduled for release on Thursday and Friday respectively. In line with the RBA’s desire, the Aussie lost ground against the USD for the most part of the year, and looks set to resume its fall into the new year, having retraced upwards in the past few weeks.

UK Bank Stress Test Results

The stress test applies synthetic market conditions to the balance sheets of large banks in an effort to determine the banks’ stability and capital reserve adequacy. This result comes with the BOE Financial Stability Report. Other news from the UK include: Manufacturing PMI, construction PMI and the Services PMI. The sterling has spent the last two weeks falling. Technically, the currency looks open to further dip, however, the data releases will be the main driver.

Canada rate decision

With lots of high impact data on the calendar for the country, the Canadian dollar is expected to be one of the major movers this week. On Tuesday, we have the GDP m/m, forecast for 0.1 percent. On Wednesday, the Bank of Canada is expected to hold its Overnight Rate at 0.5 percent, having already cut rates twice this year in a bid to stimulate the economy to neutralize the effect of the falling oil prices. On Friday, we have the Employment Change, trade balance figures and unemployment rate.

Non-farm payroll report

The job data are expected to be a key decider for the Fed. The November employment report is expected to show 200,000 nonfarm payrolls and an unchanged unemployment rate of 5 percent, after October’s surprisingly strong 271,000 jobs. Wages are projected to rise 0.2 percent, after October’s unexpected 0.4 percent increase. Serious attention will also be paid to Fed Chair Yellen’s speech on the US economic outlook on Wednesday as well as her testimony about monetary policy before the Joint Economic Committee on Thursday.

Other important data include ISM Manufacturing PMI and the ADP Non-Farm Employment Change. The dollar is presently trading at a high, with the possibility of going even further up as markets anticipate the Fed’s rate hike decision.

ECB Press Conference

This month’s ECB Press Conference is highly anticipated, considering that the central bank has hinted on the possibility of further stimulus measures to be announced at this meeting. However, most economists still forecast that the Minimum Bid Rate will remain at 0.5 percent. The Euro will be particularly watched against the dollar as the pair has been in a bearish trend for some time.

In conclusion, this week could be the most important week of the most important month. The currency markets will no doubt be in for major moves.

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