The market is expected to continue to focus on China's exchange rate management and the state of its economy more broadly. Concerns about the impact on the rest of the world has been the key market mover both in emerging markets and in advanced economies over the past few days.
Developments in the oil price will also continue to remain in focus. The oil price slumped further on Wednesday to its lowest level since 2004, causing significant falls in currencies of oil-producing countries and oil-related assets.
In the euro area, the unemployment rate and retail sales for November are set to be released. The unemployment rate reached 10.7% in October 2015, down from 11.5% a year earlier. We expect the downward trend to continue, as activity should pick up and potential growth remains very low. The progress in the labour market, together with the low oil price, supported growth in private consumption in 2015. We expect this to continue to be reflected in the retail sales figure for November, where we look for an increase of 0.4% m/m.
In Germany we get numbers for factory production. Following three months of declines, factory orders recovered somewhat in October, when they were up 1.8% m/m. We look for them to start following their usual volatile pattern and expect a monthly decline of 0.9% but we see potential upside risk to our forecasts as the latest German survey indicators have improved.
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