Dollar is generally firm as the financial markets enter into a busy week that's full of market moving events. Those events include RBA, BoC and most importantly ECB meeting. Also, a number of importantly economic data will be released including the highly anticipated US non-farm payroll as well as ISM indices. PMIs from China and UK will also be closely watched. Technically, a major focus is on how dollar will respond to the economic data and ECB meeting. Dollar index is trading above 100 handle for the moment is heading to a key resistance at 100.39. Decisive break there could trigger upside acceleration as the larger up trend resumes.
ECB is widely expected to announce additional easing measures this week. Those would probably include further reduction in the deposit rate and expansion of the asset purchase program. The central bank started the EUR 60b per month asset purchase program from March this year. And the program was expected to run till September 2016. But the move was now seen as relatively ineffective and both growth and inflation remained sluggish.
A string of US economic data will be closely watched. Most attention would be on Friday's non-farm payroll. Fed is widely expected to hike interest rate on December 16. Fed fund futures are pricing in 78% of a 25bps hike this month. And barring a disastrous NFP, Fed will still likely go with it even in case of mild disappointment in the data. The focus is indeed on the momentum of the job market and wage growth and the impact on further policy path. Futures are pricing in around 40% chance of another hike by March. And the ISM indices as well as job data will have a big impact on such expectations. That's the needed drive for dollar index to take out 100.39 key resistance.
Meanwhile Australia dollar would be facing some tough tests from China PMI data. The aussie was strong in November as RBA maintained a neutral stage, and was also supported by strong job data. However, the aussie is vulnerable to any weakness in China. The selloff in Chinese stock last week dragged down the Aussie and might trigger further reaction in the currency. RBA rate decision, on the other hand is not expected to trigger much reactions.
Here are some highlights for the week:
- Monday: German CPI, retail sales; Swiss KOF, UK mortgage approvals; Canada current account; US pending home sales, Chicago PMI
- Tuesday: China PMIs; Australia building approvals, RBA; Swiss GDP, employment, retail sales; BoE financial stability, UK PMI manufacturing; report; Eurozone PMI finals, unemployment rate; Canada GDP; US ISM manufacturing
- Wednesday: Australia GDP; UK construction PMI; Eurozone CPI, PPI; US ADP employment; BoC rate decision
- Thursday: Australia trade balance; UK PMI services; Eurozone retail sales, ECB rate decision and press conference; US ISM non-manufacturing, jobless claims, factory orders.
- Friday: Australia retail sales; Japan consumer confidence; German factory orders; Swiss CPI; Eurozone retail PMI; Canada employment, trade balance; US non-farm payroll, trade balance