FX News Today
European Outlook: Asian stock markets again traded mixed, with the boost from U.S. tax cuts quickly evaporating. Nikkei and ASX declined, Hang Seng and CSI 300 moved higher, as the BoJ left policy unchanged in the final meeting of the year. U.S. and U.K. stock futures are marginally higher as markets start to prepare for the long holiday weekend and the year end comes in sight. A EUR clearly above 1.18 against the dollar is doing little to boost the DAX as ECB asset purchases wind down today only to resume at much lower levels in January. Long yields continued to trade higher in Asia, but European yields managed to close off intraday lows on Wednesday and Treasury yields are down, so some stabilisation in quieter markets. U.K. consumer confidence dipped in December and today’s calendar still has French business confidence, as well as U.K. public finance data. Catalonia’s regional election will provide some interest although first results won’t be out until after the European close.
German house price inflation: Data shows a slight cooling, with the annual rate in the Europace home price index falling back to 5.9% from 6.2% in the previous month. Prices still rose 0.7% m/m, up from 0.3% m/m in October and the annual index for apartment remained at a very strong 7.8% y/y. The ECB continues to insist that there are no signs of wide spread asset price bubbles, but the German housing markets clearly is showing signs of strain with prices in some areas significantly overvalued. Draghi is relying on national regulators to try and deal with the issue, but in light of the last housing bubbles and crisis there remain concerns whether this will be sufficient if the ECB continues pump cash in an already overheating market.
U.S. Data Reports: The 5.6% U.S. November existing home sales surge to a cycle-high 5.81 mln pace beat estimates, following rates of 5.50 (was 5.48) mln in October and 5.37 mln in September, as sales climb above the 5.70 mln prior cycle-high rate last March. Sales in the south, which include hurricane sites in both Texas and Florida, soared 8.3% in November after a 1.9% rise in October, but declines of 1.4% (was 1.4%) in September and 5.7% in August. We saw a 0.8% November rise for the median price, but a 7.2% drop for inventories. We expect growth rates for existing home sales of a robust 20% in Q4 and a flat figure in Q1 as we partly give back the Q4 spike, after contraction rates of 12% in Q3 and 4% in Q2. Existing home sales are on track for just a 2% rise in 2017 and an estimated 3% rise in 2018, following gains of 3.9% in 2016 and 6.5% in 2015, but a 2.9% 2014 post “taper-tantrum” drop. We have cyclical increases of 68% for existing home sales and 43% for pending home sales, versus larger cyclical gains of 154% for new home sales, 171% for housing starts, and 153% for permits. The housing sector is well positioned for 2018, though growth in “existers” has been slim.
Main Macro Events Today
- Final Q3 GDP – Expectations are for Q3 GDP to be confirmed at 3.3% following the impacts of the hurricanes feeding through, however, some estimates have a tick up to 3.4% and revisions for Q2 up to 3.2%. The data (along with Weekly Job Claims and PCE) is released at 13:30 GMT and is likely to have the biggest impact on the USD today.
- Canadian CPI – Expectations are for a rise to 0.2.% in November after the 0.1% gain in October, as higher gasoline prices impact. But the CPI is seen surging to a 2.0% y/y rate in November from 1.4% in October, due to a difficult comparison with a low index level in November of last year (CPI fell 0.4% m/m in November of 2016). Gasoline prices surged in November compared to October, which is expected to drive total month comparable CPI growth. The loonie was weaker in November versus October, which could weigh on prices of imported goods. But gas prices shine the brightest, leaving the risk to the upside. The core measures were mixed in October. The CPI trim was up 1.5% y/y, matching September’s 1.5% gain. The CPI common grew 1.6% y/y versus a 1.5% increase. The CPI median slowed to 1.7% y/y from 1.8%
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