Fundamental Comment

Economic Week: PMIs, BOE interest rate decision

Economic Week: PMIs, BOE interest rate decision

Flash purchasing managers’ index data for December, which will be issued in a number of major economies, will receive great attention from investors, as well as the interest rate decision from the Bank of England.

The Chinese government will also release important data, including industrial production and retail sales, which are often of great importance as the markets will continue to follow closely the latest developments in the trade relations between the United States and China.

US Dollar

This week, the movements of the US dollar will depend on the impact of economic data from the world's largest economy, as well as any developments related to the trade war with China.

As for the economic reports, the most prominent is the preliminary composite manufacturing and service PMI report for December, which may show a rise to 52.3 from 52.0 in November.

As for the final U.S. GDP, it is expected to remain unrevised at 2.1 percent growth in the third quarter on annual basis, after recording a growth rate of 2.0 percent in the second quarter.

Also, some data on the housing sector and consumer confidence may receive some attention from investors.

It should be noted that any developments or statements related to the trade dilemma would affect the movements of the dollar more than the economic data.

Pound Sterling

Investors and traders in the pound should keep their eyes open this week, as the Bank of England will decide on interest rates and will publish some economic data of high relevance.

British monetary policymakers may decide to keep the cost of borrowing at 0.75 percent, as the central bank is likely to set the path of the interest rate after more reassuring of the Brexit.

Reports of inflation, retail sales and the final GDP from the British economy are the most important this week.

Analysts expect the consumer price index, the BOE’s preferred measure of inflation, may decelerate to 1.1 percent in November year-on-year from 1.5 percent recorded in October.

As for the retail sales, it may witness a 0.5 percent increase in November, after recording a decrease of 0.1 percent in October.

For the British economy as a whole, it is expected to grow at a rate of 0.3 percent in the quarter ended in September, according to the final gross domestic product reading, following a contraction by 0.2 percent in the second quarter.

The UK will also to release its preliminary PMI for the services and manufacturing sectors for December, which will provide the latest updates on the health of the UK economy at the end of the fourth quarter.

Euro

The euro may be more affected by the latest developments in the financial markets, but investors will carefully watch the Purchasing Managers’ reports from the euro area.

The composite PMI index of manufacturing and services sectors in the euro area may show a slight decline in growth in December to 50.4 from 50.6 in November.

Also, the final reading of the consumer price index for November is expected to confirm a 1.0 percent rise on an annual basis after recording an increase of 0.7 percent in October.

Commodities

Gold prices rose slightly in the past week, taking advantage of the dollar's decline to its lowest level since mid-July, but the Conservatives wining a majority in Britain’s Parliament and news that the United States agreed on a trade pact with China prevented further gains.

Prices will depend this week on the latest developments in the US-China trade talks, in addition to economic data related to global growth.

Regarding oil, prices jumped to three-month highs last week as the United States and China approached a solution to their 18-month trade war that has raised big questions about global demand for crude.

Oil price movements will depend on the state of optimism or pessimism in the markets in the event of any developments in the US-China negotiations, and the weekly US government report tracking the change in crude stockpiles.

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