Macro events & news for December 09, 2015

December 9, 2015

FX News Today

German trade surplus continues to widen.Germany posted a sa trade surplus of EUR 20.7 bln in October, up from EUR 19.2 bln in the previous month, as exports declined 1.2% m/m, which was counterbalanced by a 3.4% m/m drop in imports. Import numbers have been very volatile and as this is nominal data also driven by exchange rate and especially oil price developments. Unadjusted data show a trade surplus of EUR 208.8 bln in the first 10 months of hteyear, up from EUR 177.8 bln in the corresponding period 2014. The current account surplus widened to EUR 199.5 bln in the January to October period from EUR 168.8 bln last year. So Germany is likely to remain under attack for its widening trade surplus, despite the fact that for once overall growth is actually driven largely by consumption and domestic demand.

China’s CPI grew at a 1.5% y/y pace in November, slightly better than expected following the 1.3% y/y clip in October. The annual CPI growth rate had been slowing since seeing a year high 2.0% y/y rate in August (September was +1.6% y/y), and the pick-up in November suggests government stimulus efforts may have provided some lift to demand. The PPI fell 5.9% y/y in November, matching the rate of decline in October. China’s stocks are unchanged, while the Nikkei is down 1.1% and the Hang Seng is off 0.7%.

BoC Poloz downplayed the September GDP plunge, noting that it was driven by special factors. Notably, there was a fire in the oil sands that shut-down some production. That production was back on line in October, he noted. As for Q3, he reminded that the Bank projected it would be “puffed-up” by special factors, notably the child tax credit. Moreover, the weak hand-off to Q4 was also anticipated. They will review the Q4 projection for the January MPR. He reminded that “data do not go in a straight line.” These comments were consistent with his ongoing view that the economy is evolving roughly as they expected in October. In a separate answer, he counseled patience, saying that only half the impact of the policy action this year has been seen. Poloz shot down drawing any conclusion for the discussion of unconventional policy in today’s prepared remarks. “There is no need to contemplate these measures,” he said. He said all the ingredients for Canada’s recovery are in place. “We are not talking about doing that (lowering rates to the lower bound), we are making sure our tool kit is up to date,” he said. He said the bank would use unconventional again in the case of a major shock, such as was seen in 2008. On the growth trajectory, he added that “like we said last week and in October, the pieces are coming together.”

US JOLTS job openings fell 151k in October to 5,383k, following September’s 157k rebound (revised from 149k). That caused the rate to dip to 3.6% from 3.7%. Hiring rose 57k to 5,137k after declining 1k previously (revised from -32k). The rate was unchanged at 3.6% (September was revised up from 3.5%). Quitters rebounded 52k in September after falling 44k previously (revised from -51k). The quit rate was steady at 1.9%. The data are on the old side and won’t impact the FOMC, especially as the November jobs data revealed a solid round of numbers.

Main Macro Events Today

US Wholesale Trade: October wholesale trade data is out today and should show sales up 0.5% (median 0.3%) following a 0.8% drop in August. Inventories should be down 0.1% following a 0.5% addition in September. Data in line with these forecasts would leave the I/S ratio steady at 1.31 for a third month from August.

RBNZ rate decision: The Reserve Bank of New Zealand is expected to cut the official cash rate today to 2.5% from 2.75% after the governor Wheeler repeated his comment that “some further easing in the OCR seemes likely”. However, as mentioned this is not the first time the governor says this.

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