The first week of December will get off to a packed start with a number of key indicators and central bank meetings set to keep traders busy. Among the highlights are Australian GDP figures for the third quarter, European industrial output figures and US nonfarm payrolls. Also in focus are central bank meetings in Australia and Canada.
RBA to hold rates as Aussie GDP rebounds
The Australian dollar will be under the spotlight next week as a flurry of economic data is due out of Australia as well as a policy meeting by the Reserve Bank of Australia. Monday's business inventories numbers and Tuesday's current account figures for the third quarter will be a good indication to Wednesday's GDP report. Australia's economy is expected to have expanded by 0.7% in the third quarter. This is slightly below the prior quarter's 0.8% rate but it takes the annual pace up to 3.0% from 1.8% as last year's shock contraction in third quarter GDP drops out of the calculation.
A stronger reading may provide the aussie with a bit of a boost but is unlikely to change the bearish outlook for the currency given the subdued inflation picture in the country. The RBA should give its latest thoughts on the growth and inflation outlook on Tuesday when it announces its latest policy decision. No change in rates is expected from the RBA but its statement will be scrutinized for any shift in its language. Also important will be the October retail sales and trade balance on Tuesday and Thursday respectively.
Apart from the Australian data, the aussie will also have to contend with Chinese releases next week (the aussie is regarded as a liquid proxy for China's economy due to Australia's export dependency with China). Friday will see the release of the monthly trade data for November, which should indicate how exports and imports performed during the month. They will be followed by November producer and consumer prices on Saturday.
Sticking to Asia, Japan will publish its second estimate of GDP growth in the third quarter on Friday. An upward revision to the preliminary estimate of 1.4% is likely after data this week showed business capital expenditure accelerated to 4.2% in the third quarter from 1.5%.
Bank of Canada to stand pat
A December rate hike by the Bank of Canada was looking like a strong possibility not that long ago but those expectations have receded on dovish remarks by BoC officials and softer economic data in recent weeks. The Bank is widely anticipated to keep its overnight rate unchanged at 1% for the second straight meeting on Wednesday. However, it may provide some forward guidance about the timing of the next rate hike in its statement, which may not be that long away given this week's November employment and third quarter GDP numbers that surprised on the upside. A hawkish statement could help the Canadian dollar move further away from one-month lows versus its US counterpart.
Industrial output and Brexit in focus in Europe
The Eurozone economy has been going from strength to strength in 2017 and data due next week is expected to further confirm this view. The third estimate of Eurozone growth in the third quarter is expected to remain unrevised at 0.6% on Thursday. The final readings of the services and composite PMIs are also forecast to show no revision on Tuesday. Other business surveys out of the euro area will include the sentix index on Monday, with a slight fall expected, as well as producer prices and retail sales figures on Monday and Tuesday respectively.
Germany and France will publish industrial production and trade figures for October. German industrial output is expected to see a 1.1% month-on-month rebound on Thursday after a sharp drop in the prior month. French output is forecast to see a small dip during the month in Friday's numbers.
Across the channel, the UK will also release industrial output and trade figures. As a slowdown in consumer spending drags on the dominant services sector, the manufacturing sector is starting to become a bright spot in the British economy as rising global demand and a weaker sterling finally start to lift UK exports. Both industrial and manufacturing output are expected to rise by just 0.1% m/m in October, but the annual rates should quicken to the fastest since late 2016. Also to watch next week are the construction and services PMIs out on Monday and Tuesday, respectively.
A bigger potential mover for the pound though will likely be the outcome of the meeting between British Prime Minister Theresa May and European Commission President Jean-Claude Juncker and EU chief Brexit negotiator Michel Barnier in Brussels on Monday. After this week's headlines that the UK and the EU are very close to an agreement on the Brexit divorce settlement, any setbacks in the negotiations over the next seven days could knock sterling sharply below its current two-month highs versus the US dollar.
US hourly earnings eyed in NFP report
Friday's nonfarm payrolls report will be the main focus in next week's US calendar. But before then, there will be plenty of other data to occupy investors. October factory orders will start the week on Monday, followed by the goods trade balance on Tuesday. The ISM non-manufacturing PMI for November will also be watched on Tuesday, which hit a 12-year high in October. The preliminary reading of the University of Michigan's consumer confidence index on Friday will be important too but all eyes will be on the November jobs report.
The US economy added 261k jobs in October as the labour market bounced back from the disruption caused by the hurricanes in September. Jobs growth is forecast to ease to around 188k in November, though that's still a strong figure considering the economy is close to full employment. The unemployment rate will likely remain steady at a 17-year low of 4.1%.
With recent US data already pointing to continued solid growth in the US and a December rate hike fully priced in by the markets, the NFP report is unlikely to be a game changer unless there was to be a big surprise in wage growth. Average hourly earnings are expected to rise by 0.3% m/m in November, up from 0% in October and pushing the annual rate to 2.9%, which would be the highest in nearly a year. Faster wage growth ahead of the December FOMC meeting when Fed policymakers publish their quarterly projections on the rate path could lead to a more hawkish dot plot chart.