Quiet Thanksgiving Thursday; Eurozone Inflation Eyed Today

Markets remain rangebound due to Thanksgiving, eurozone inflation is expected to tick up, while trade headlines and election polling remain in focus

Previous Day's Market Highlights

G10 FX was a quiet, lonely, deserted place on Thursday, with the closure of US desks for Thanksgiving resulting in thinner liquidity, and significantly reduced trading volumes.

While I could mention that eurozone economic sentiment remains firmly rooted in pessimistic territory, and that sterling softened a touch and gave back some of yesterday's gains, the truth is that nothing of any major significance for markets happened yesterday.

Hence, we'll move on to today, which should be a tad more exciting.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1730 1.1765 1.1550 1.83%
GBP/USD 1.2915 1.2986 1.2761 1.73%
EUR/USD 1.1010 1.1175 1.0989 1.66%
GBP/AUD 1.9055 1.9145 1.8546 3.13%
GBP/NZD 2.0090 2.0331 1.9955 1.85%
GBP/CAD 1.7155 1.7270 1.6850 2.43%

Today's Market Highlights

After a quiet Thanksgiving Thursday, today’s economic calendar is much busier, likely resulting in increased volatility throughout the day ahead.


Eurozone CPI - Remaining Benign

Today's highlight will be the release of flash CPI inflation figures for November, set to - once again - show the pace of price increases remaining benign across the eurozone. However, there may be some slight signs of a turnaround, with headline CPI expected to tick up to 0.9% YoY, having hit a 3-year low last month.

Meanwhile, the core measure, which excludes volatile food and energy prices, is also expected to increase, with a consensus estimate of 1.2%, which would be the fastest pace of core inflation since April.

Nonetheless, the inflation backdrop across the common currency area remains incredibly benign, posing a significant challenge to new ECB President Lagarde. It is, however, difficult to see Lagarde turning the situation around single-handedly, with fiscal stimulus from eurozone government's urgently required to assist policymakers and their largely depleted toolkits.

While the euro may experience a brief pop on better than expected inflation figures, any gains should prove relatively short-lived, with monetary policy set to remain ultra-accommodative for the foreseeable future.


Eurozone Unemployment - Papering Over the Cracks?

Markets will also get their latest read on eurozone unemployment this morning, with expectations for joblessness to remain at a more than 11-year low of 7.5% for a third consecutive month.

However, despite the low unemployment rate, wage growth across the euro area remains subdued, hence exerting little in the way of upward pressure on inflation, and perhaps being symptomatic of broader, more systemic issues with the bloc's labour market.




Canada GDP

Today's other data highlight comes from Canada, in the shape of third quarter GDP. The Canadian economy is expected to have expanded by 1.2% on an annualised quarter-on-quarter basis in Q3, some distance below the 3.7% clip recorded in Q2.

Much of the growth headwind will likely stem from ongoing US-China trade tensions, in addition to a broader, global, slowdown - particularly in the manufacturing sector - weighing on activity.

The BoC acknowledged at their last rate decision that 'economy's resilience will be tested' in the coming months, hence have, to a large degree, prepared themselves for a slowdown in the pace of economic expansion. A softer than expected print, however, will likely weigh on the loonie, as markets would once again ramp up bets on the BoC looking to loosen policy in the near-term.



Next Week

Looking ahead to next week, the economic data calendar is busy, while geopolitical issues will continue to dominate.

On the latter point, investors' risk appetite will continue to be determined by developments in the US-China trade war, with particular focus likely to be placed on any retaliatory action from China in response to President Trump's signing of a Bill seen as being in support of Hong Kong protestors.

Meanwhile, sterling will remain driven by shifts in sentiment towards the election result as we approach polling day on 12th December. Signs that the Conservatives are maintaining their lead should see the pound remain well-supported.

On the data front, market participants will get their latest health check on the global economy, with both manufacturing and services PMIs due from all major economies. The data will be examined for any signs of green shoots in the manufacturing sector, as well as any spill-over effects of the ongoing production slowdown on the non-manufacturing sector. Other notable releases include third quarter Australian GDP, as well as the latest labour market reports from both the US and Canada.

Finally, a couple of central bank policy decisions are due next week, from Australia and Canada. Both the RBA (Tues) and BoC (Weds) are expected to leave rates on hold, though focus will be on the policy outlook, with any hints of looser policy on the horizon likely to be met with the respective currencies coming under pressure.

Today's Economic Calendar

Time Currency Release Consensus Previous
10.00am EUR Flash CPI (YoY - Nov) 0.9% 0.7%
10.00am EUR Flash Core CPI (YoY - Nov) 1.2% 1.1%
10.00am EUR Unemployment Rate (Oct) 7.5% 7.5%
13.30pm CAD GDP (Annualised QoQ - Q3) 1.2% 3.7%