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A Rocky Week To Come

Meetings, Speeches, and Testimonies Due in the Coming Sessions

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This week ahead will be prove quite the spectacle as vital statistics will be released that will impact upcoming interest rates decisions. OPEC meetings and speeches from the Bank of England Governor, the President of the European Central Bank, and Chair of the Federal Reserve is where the spotlight falls as markets shift on their words.

Deflation Slowdown in Spain

Europe’s fourth largest economy, Spain, grew the third quarter with year-on-year value of 3.40%. On a quarterly basis, the economy decelerated to 0.80% meeting previous and expected values. Readings obtained on Thursday indicate the highest rise since the last quarter of 2007, the beginning of Europe’s financial crisis. Household consumption increased by 3.50% and investment up 6.50% on the year. Government spending also rose by 3.00%. Fridays CPI values showed consumer prices are expected to contract by -0.30% beating October’s values of -0.70% and median estimates of -0.50%. As employment rises in Spain, its economy is among the fastest growing in the Euro Area this year. Low energy prices, easier financing conditions boosted in large part by the ECB, coupled with tax breaks have shown a substantial boost in economic momentum. The EURUSD ended the last week lower, tumbling below the 1.0600 threshold to 1.0596 before the close of trade.

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Japan’s Easing Measures

Japan’s Prime Minister, Shinzo Abe, is attempting to accelerate economic activity by boosting spending in social programs. A stimulus package in infrastructure will be implemented shortly with the hope of expanding the economy by 20% by the year 2020. Child-care facilities along with elder-care facilities will be built in order to accommodate those in need but also help people to enter and stay in the workforce. One of the major lingering problems preventing more robust growth in Japan are stagnant wages. The Prime Minister and Bank of Japan have urged businesses to share more of their record profits with workers, but have so far yielded no successful results. The upcoming stimulus package will be finalized by the middle of December and submitted in January to the parliament where the size of package is estimated to reach approximately $24 billion. USDJPY has gained modestly in early trading on the back of more stimulus.

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UK Temporary Slowdown

United Kingdom quarterly GDP fell to 0.50% compared to the 0.70% of previous period but year on year values remained stable at 2.30% expansion. The value is said to be mostly driven by the growing of domestic spending. Household demand rose by 0.80%, a 17th consecutive rise, along with Government spending jumping to 1.30%. The biggest contributor was noted to be in land improvements and infrastructure, granting gross capital formation a rise of 7.20%. The UK economy has been helped with low inflation and a growth in wages which have added to consumer confidence despite the anemic global economic backdrop. Weak global demand and the Pound gaining in strength has weakened export competitiveness, however, the recent losses in the Pound should provide some tailwinds. Economists however, choose to label the latest economic conditions as transitory with spending gains forecast to boost stable and sustainable growth.

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Drop in Gold

Gold plunged on Friday, falling to its lowest since January of 2010. Weakened by a sturdy dollar and the expectations of a US interest rate hike next month, gold posted its sixth consecutive week decline. The US dollar is trading near an eight-month high against major currency peers while largely assisted by Euro weakness and the increased probability of US interest rate liftoff in mid-December. Inflation continues to remain low, diminishing the value of gold as an inflationary hedge with many of the world’s advanced economies hanging just on the cusp of deflationary territory. Easing demand from jewelers at prevailing levels also led to a fall in prices. Gold prices slipped last in the session on Friday dropping -1.20% on the session to $1,052.78 per troy ounce after opening the day at $1,057.95. Any move higher in the dollar is likely to see prices continue to tumble below key support at $1050.00.

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