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Week Ahead: Highlights include US PCE, UK GDP, RBA Minutes

By Newsquawk Voice Ltd (Ryan Anderson)Market OverviewDec 17, 2021 14:46
uk.investing.com/analysis/week-ahead-highlights-include-us-pce-uk-gdp-rba-minutes-200505259
Week Ahead: Highlights include US PCE, UK GDP, RBA Minutes
By Newsquawk Voice Ltd (Ryan Anderson)   |  Dec 17, 2021 14:46
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MON: PBoC LPR Setting
TUE: Canadian Retail Sales (Nov); RBA Minutes (Dec)
WED: UK GDP (Q3); US GDP F (Q3)
THU: US PCE (Nov) and Durable Goods (Nov); Canadian GDP (Oct); US Uni. of Michigan F (Dec); Japanese CPI (Nov)
FRI: Christmas Eve


NOTE: Previews are listed in day-order

PBOC LPR (MON)

The PBoC is to decide on its benchmark lending rates next week where there are mixed views on whether the central bank will maintain the 1-Year Loan Prime Rate at 3.85% and 5-Year Loan Prime Rate at 4.65% for the 20th consecutive month. There has been increased speculation for a potential adjustment with press reports noting that the Loan Prime Rate could be reduced ahead of the holiday season after the PBoC recently cut the RRR by 50bps to release CNY 1.2tln in liquidity and also lowered the relending rate by 25bps for agricultural and small companies which was a more targeted support measure.

However, the decision to maintain the 1-year MLF rate this week lessens the likelihood of an LPR adjustment given that the 1-Year MLF rate is seen as a bellwether for the central bank's intentions for the LPR and was cut first prior to the last 3 occasions that it lowered the benchmark Loan Prime Rate. The rhetoric from the central bank also doesn’t suggest an urgency for adjustments as it reiterated that liquidity will be kept reasonably ample and will step up cross cyclical adjustments, but will not resort to flood-like stimulus.

RBA MINUTES (TUE)

The minutes will be watched for commentary surrounding inflation and timings of the taper. Earlier in the week, RBA Governor Lowe said he expects conditions for a rate hike will not be met next year and that they are "still a fair way" from a hike with the Board prepared to be patient. Lowe stated that the Board discussed tapering bond purchases in February and ending in May, while they could end buying in February if economic progress is better than expected, but added that they could also review bond-buying again in May if the data disappoints and the QE outlook depends on inflation data, the labour market and strength of consumer confidence.

To recap, the RBA maintained its Cash Rate Target at 0.10% and kept weekly bond purchases at AUD 4bln until mid-February, as expected. It also stated that the Board will consider the bond purchase program at the February meeting and holdings of Australian government bonds would total AUD 350bln by mid-February, which is providing significant support to the economy.

Furthermore, it outlined the considerations it will take into account when deciding on the future of bond purchases, which include the actions of other central banks, how the Australian bond market is functioning and most importantly, the actual and expected progress towards the goals of full employment and inflation consistent with the target.

For what it’s worth, RBA-watcher McCrann says "After the latest RBA board meeting it is clear Australia is moving closer to a rate rise, not just potentially in 2023 but possibly even relatively early next year."

US PCE (THU)

Currently, Core PCE M/M is expected to rise by 0.4% in November, maintaining October's pace, although some desks are calling for a 0.5% rise. Y/Y is seen picking up to 4.5% from 4.1%, with analyst forecasts ranging between 4.2% and 4.5%.

Analysts at Credit Suisse look for a 0.4% and 4.6% rise for M/M and Y/Y, respectively. Credit Suisse (SIX:CSGN) notes "Supply chain shocks from earlier in the year and strong seasonal demand are leading to another leg up in core goods prices that is driving most of the sequential strength". Adding to this, there has been a broadening out in services inflation and a notable pick up in shelter prices.

If the PCE report follows a similar suit to the November CPI report, it may not be something to worry too much about given CPI was more-or-less in line, with the headline rising 0.8%, just marginally above the 0.7% expected.

Nonetheless, prices remain at elevated levels and the Fed has started to react to the rising inflation prints by signalling three hikes next year and doubling the pace of its asset purchase taper for it to conclude in March, rather than the initially projected June. This may help cool some of the inflationary fears looking ahead.

Credit Suisse expects inflation to slow significantly by the middle of 2022, but highlights a volatile path in the short-term due to the rise in Covid cases and the Omicron variant. However, Y/Y base effects will be a significant headwind by Q2, though the timing and extent are highly uncertain, Credit Suisse added.

Elsewhere in the report, Personal Income is expected to slow to a 0.4% rise from 0.5% (ranges between 0% and 0.7%), with spending also set to slow, to 0.6% from 1.3%, with analysts forecasting between 0.3 and 1.4%. Credit Suisse points out that retail spending slowed in November, but some of this may be due to seasonal factors with supply chain worries pulling forward holiday sales. Credit Suisse notes "Discretionary services spending likely accelerated in November, but this strength could prove to be short-lived as a winter COVID wave leads to a return of voluntary social distancing".

CANADIAN GDP (THU)

Canada GDP is seen rising 0.8% in October, and up from the prior 0.1%, which would be in-line with the StatsCan flash estimate after Q3 GDP. RBC highlighted that supply chain disruptions in the auto sector had eased somewhat, while vehicle manufacturing sales rebounded from the steep decline in September, and oil sands extraction in Alberta saw a 7% M/M rise, according to its own count, as another sector seeing strong growth. StatsCan also noted that retail sales likely increased by 1%, while wholesale trade saw a 1.4% rise, in line with the consensus view and that of the StatsCan estimate. Looking ahead, RBC expects output to rise 0.5% in November, but said that would have been larger if it wasn't for the British Columbia floods in the second half of the month.

JAPANESE CPI (THU)

Japan’s National CPI for November is expected to rise to 0.4% M/M from October’s 0.1%. Last month’s uptick was led by an acceleration in fuel costs whilst pressures from raw materials shortages gradually passed through to retailers. Analysts have suggested consumer inflation is expected to pick up in the coming months due to higher fuel costs. BoJ Governor Kuroda, at Friday’s post-meeting presser, acknowledged that inflation expectations have been rising recently, and there may be upside risks to prices – but the strength will likely not persist.

Week Ahead: Highlights include US PCE, UK GDP, RBA Minutes
 

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Week Ahead: Highlights include US PCE, UK GDP, RBA Minutes

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Full Entertainment
Full Entertainment Dec 19, 2021 10:55
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AUDUSD ?
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Ahmed Omerian Dec 19, 2021 10:55
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yes
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Help me
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for what
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audusd buy/sell?
 
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