Chinese Yuan Stronger, US CPI, US Banks Earnings Next Week
The US dollar recovered from the multi-month low against other currencies, with the US Dollar Index (USDX), which measures the performance of the dollar against six other major currencies, closing higher. Meanwhile the South African rand (ZAR) further improved by Friday morning, reaching a new monthly high as Manufacturing Production for November was reported up by 0.7%, which was above expected levels.
Gold remained close to its six months high given the weakness of the dollar and a more dovish monetary policy approach by the US Federal Reserve. While for oil the upside was limited due to worries over global economic growth, the energy commodity is on track for the biggest weekly gains in two years.
Equity indices across the world again closed mostly higher on indications that the US-China trade talks are making progress. In the face of concerns about global growth, markets would welcome the resolution of the ongoing trade conflict between the two biggest economies by GDP.
On Friday Italy publishes it Industrial Production statistic for November. The United Kingdom will also release key economic data from November, such as the Trade Balance, Industrial Production and Manufacturing Output. From the US data on Consumer Prices (CPI) and the Treasury Budget is expected.
Given the weakness of the dollar on Thursday, the EUR/USD managed to rise to the highest level since October, but later retraced. However the previous resistance level around 1.1485 was not broken and could have helped support a later move again higher above 1.15.
European data was mixed with Italian Retail Sales at +0.7% m/m above expectations (expected +0.2%), while the French Industrial Production unexpectedly suffered a contraction of -1.3% (expected +0.0%). In the US Jobless new Claims were again at a very low level of 216 thousand (expected 224 thousand).
On Friday Italy publishes it Industrial Production statistic for November. From the US data on Consumer Prices (CPI) and the Treasury Budget is expected. Next week the EU will release its Trade Balance and countries like France, Germany and Italy their CPI data.
The Chinese yuan is on course for its best week since 2005. Multiple factors are said to be responsible for the strengthening of the yuan, such as the remarks and minutes from the US Federal Reserve, where it clearly took a step back from the previous rhetoric of clear rate hikes for this year and sees the future path to its monetary policy not so clear anymore. Also possible progress on the US-China trade talks could be working in the support of the yuan.
Even the weaker consumer (CPI +1.9% vs. +2.1% expected) and producer price inflation (PPI +0.9% vs. +2.7% previous) statistics were unable to stop the currency rates from appreciating against the dollar.
Next week in from China data on House Prices and further data on trade is expected.
After the series of gains since the start of the year, WTI crude oil ended the trading day on Thursday almost unchanged. The upside remained limited due to fears of a global economic slowdown as many analysts are downgrading their forecast regarding global economic growth for 2019. However the efforts by OPEC and especially Saudi Arabia to curb output numbers might be paying off in supporting the upwards momentum with oil prices on track for the biggest weekly gain in two years.
On Friday the US Baker Hughes Oil Rig Count will be released, indicating the number of currently operating oil rigs in the United States. Since mid-October the reported number of operating oil rigs stood within the limited range of 873 to 888.
US stock indices closed again higher for the fourth consecutive day this week, with especially strong performance seen in the utilities (US Utilities ETF +1.56%) and industrial (US Industrial +1.51%) sector, while banks (US Banks ETF -0.05%) and consumer discretionary (US Cyclicals ETF -0.19%) on average underperformed.
Shares of American Airlines (-4.19%) took a dive after the company reduced its profit estimates for the last year and released a revenue guidance on the lower end of the expected range. Its competitors Delta Air Lines and United are due to release their earnings the following week.
Canopy Growth’s (+12.19%) share value rallied with double-digit percentage gains for the second day in a row. Positive analysts’ review as well as upbeat expectations from its significant shareholder Constellation Brands could have helped push the stock value higher.
Next week some of the biggest banks on Wall Street like Citigroup, JPMorgan Chase and Bank of America are set to publish their quarterly financial results. Netflix is also set to release its earnings on Thursday.
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