Central Bank Meetings Flood the Calendar Next Week (page 2 of 2)

Over in Switzerland, recent economic data has been really mixed. This morning, third quarter GDP was sharply weaker than expected while the manufacturing sector PMI report hit a fresh high. Earlier this week, leading indicators were softer despite a stronger UBS consumption index. Taken together, the data suggests that even though economic growth has seen moderation, it is not enough to be worried. Next week, the only piece of data that is scheduled for release is the unemployment rate and a speech by SNB President Roth.

British Pound - The British pound charged higher once again, climbing a total of 800 pips since last Wednesday. Part of the reason for the currency's larger rise against the dollar (compared to the Euro) is the fact that if the US lowers interest rates, UK rates will be on par with US rates, eliminating any negative carry advantage. Over the past week, it has become clear that the housing market is the economy's primary source of growth. Domestic spending is beginning to falter while manufacturing sector growth, as reported by today's PMI report is slowing. Even though the UK is not an extremely export dependent economy, as the currency continues to rise, it does make UK companies far less attractive acquisition targets, which could in essence put a stop to the aggressive merger flow that has benefited the British pound. In the week ahead, there are a ton of data in addition to the BoE's interest rate decision to watch.

Japanese Yen - The Japanese Yen has behaved very differently across currency pairs this week. For the most part, it has sold off against the majors, but the two currencies that it has managed to rally against have been the US and Canadian dollars. This divergence in price action tell us that the market is not really bullish on the yen, but instead, it is very bearish on the US and Canadian dollars. The data released last night was mixed, with consumer prices falling and household spending rising. The weakness of CPI should keep expectations for any rate hikes by the BoJ capped, especially after the more neutral comments from central bank Governor Fukui earlier this week. As a result, for the time being, carry trades continue to hold.

Commodity Currencies (CAD, AUD, NZD) - The Australian and New Zealand dollars have managed to hold onto all of its gains from the past week thanks to the weakness of the US dollar. Australian data has been mixed, with the latest PMI report jumping from 51.9 to 54.4 in the month of November. Next week brings up a lot of key data for Australia including the RBA monetary policy announcement, GDP and employment. New Zealand will also be meeting to discuss rates along with the Bank of Canada. No rate changes are expected from any of the central banks. Canada reported stronger employment numbers this morning, but that his done little to boost the CAD.