U.S Stats, COVID-19 News, and Updates from Capitol Hill in Focus

Earlier in the Day:

It’s was a busy start to the day on the economic calendar this morning. The Kiwi Dollar and the Aussie Dollar were in action, with economic data from China also in focus

For the Kiwi Dollar

The Westpac Consumer Sentiment Index rose from 95.1 to 106.0 in the 4^th quarter, inching close to the long-run average of 110.8. In the 3^rd quarter, the Index had fallen from 97.2 to 95.1.

According to the 4^th quarter survey,

• Spending appetite improved markedly, with the “Good time to buy” sub-index rising from -2.5 to 7.0.
• Consumers also had a more optimistic outlook on the economic outlook and expected financial situation.
• The “expected financial situation” sub-index jumped from 1.8 to 13.0, to sit above the average of 11.4. More impressively, the 1-year economic outlook sub-index surged by 25.3 points to -1.0 to take it above the average -2.9.
• Looking at the 5-year economic outlook, the sub-index climbed by 16.1 points to 26.0, falling shy of the average 28.8.

The Kiwi Dollar moved from $0.70808 to $0.70830 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.01% to $0.7082.

For the Aussie Dollar

The RBA meeting minutes were in focus this morning.

Salient points from the minutes included:

International Economic Developments

• While effective vaccines would reduce downside risks, infections continued to see marked increases in key economies.
• Members noted that global economic activity had bounced back faster than anticipated in the September quarter. Tightening containment measures in the December quarter had resulted in a loss of economic momentum.
• The imposition by Chinese authorities of import bans and other obstacles to importing some Australian products had also had an effect. It was noted, however, that Chinese demand for Australian iron ore remained firm.

Domestic Economic Developments

• Members noted that the recovery had established reasonable momentum, supported by the lifting of restrictions in Victoria.
• Expectations of GDP growth in the September and December quarters had been upgraded and employment had recovered faster than expected.
• Significant spare capacity in the labor market and the economy more generally remained, however.
• Members expected the economic recovery to still be uneven and protracted with inflation remaining low, nonetheless.

Considerations for Monetary Policy

• Members noted that the global outlook remained uncertain.
• Infection rates had risen sharply in Europe and the U.S, leading to a loss of momentum or even reversal in economic recoveries.
• Vaccines should support the recovery, though the recovery is also dependent on ongoing fiscal and monetary policy support.
• Consumer spending in Australia had risen as restrictions eased, with business and consumer confidence on the rise.
• Employment had recovered strongly, with unemployment likely to fall below the 8% expected last month.
• Given the outlook for both employment and inflation, members acknowledged that monetary and fiscal support will be required for some time.
• The Board remains committed to not increasing the cash rate until actual inflation is sustainably within the 2-3% target range.
• On this basis, the Board does not expect to increase the cash rate for at least 3-years.
• Additionally, the Board remains of the view that it would be appropriate to remove the yield target before the cash rate increases.
• Members agreed to keep the size of the bond purchase program under review and are prepared to do more if necessary.

The Aussie Dollar moved from $0.75410 to $0.75409 upon release of the minutes, which preceded economic data from China. At the time of writing, the Aussie Dollar was up by 0.01% to $0.7536.

From China

Industrial production, fixed asset investment, and retail sales for November were in focus.

• Fixed asset investments rose by 2.6%, year-on-year, following a 1.80% rise in October. Economists had forecast a 2.6% rise.
• Industrial production rose by 7.0%, following a 6.9% rise in October. Economists had forecast a 7.0% rise.
• Retail sales rose by 5%, year-on-year, however, falling short of a forecasted 5.2% rise. In October, sales had risen by 4.3%.

The Aussie Dollar moved from $0.75356 to $0.75392 upon release of the data.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.02% to ¥104.07 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Finalized November inflation figures are due out of France and Italy.

Barring any marked revisions from prelims, however, we don’t expect the figures to have a material impact on the EUR.

COVID-19 news and further chatter on Brexit will influence.

At the time of writing, the EUR was up by 0.12% to $1.2159.

For the Pound

It’s a busy day ahead on the economic calendar. Key stats include November claimant count and October employment change and unemployment figures.

Wage growth figures for October are also due out but will likely have a muted impact on the day.

While the stats will influence ahead of Thursday’s BoE monetary policy decision, Brexit chatter will also remain in focus.

At the time of writing, the Pound was up by 0.11% to $1.3339.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. NY Empire State Manufacturing figures are due out along with industrial production and import and export price figures.

We would expect December’s NY Empire State and November’s industrial production figures to have the greatest influence.

Away from the economic calendar, however, updates from stimulus talks on Capitol Hill will influence.

At the time of writing, the Dollar Spot Index was down by 0.06% to 90.658.

For the Loonie

It’s a relatively busy day ahead on the economic data front. Key stats include November housing starts and October Manufacturing Sales figures.

Barring particularly dire numbers, however, the stats will likely have a muted impact on the Loonie.

The IEA’s monthly report, COVID-19 news updates, and chatter from Capitol Hill will be key drivers on the day.

At the time of writing, the Loonie was up by 0.05% to C$1.2758 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.