The issues in Europe and the tensions in Korea could have markets overlook upcoming fundamentals, but the upcoming economic docket will have a significant impact on medium term direction. An ECB rate decision will garner attention to see if the recent events have changed the course of future monetary policy for the region. Growth readings from Canada and Australia will provide a gauge for global demand for natural resources and the potential for continued expansion. Meanwhile, U.S. manufacturing and employment data will provide insight into the sustainability of the recovery in the world's largest economy.
- Canadian GDP (3Q) – November 30– 13:30 GMT
The pace of Canadian growth is forecasted to have slowed to 1.5% from 2.0% in the prior period as demand from abroad and household spending is slowing. A consecutive quarter of lower GDP could be detrimental to the Canadian dollar especially if the current flight to safety prevails. The OECD is predicting a sharp drop in growth for the export-driven economy as emerging markets take steps to cool their economies while the U.S. struggles to maintain its recovery. Accelerating growth would show the economy remains resilient which makes a case for "loonie" strength.
- Australian GDP (3Q) – December 1– 00:30 GMT
Australian quarterly growth is expected to slow to its lowest level in a year at 0.5% as slowing export demand and higher interest rates begin to weigh in the economy. The RBA unexpectedly raised their target rate to 4.75% at their last policy meeting. A considerably slowdown in activity will dim the outlook for further tightening, potentially weighing on the Aussie. Some economist are fearing that the high borrowing costs could lead to the first contraction since the fourth quarter of 2008, which could send the commodity dollar tumbling.
- U.S. ISM Manufacturing (NOV) – December 1 – 15:00 GMT
Following October's five month high of 56.9, the ISM manufacturing gauge is expected to slip to 56.5 but continue to show expansion in the sector. A weak dollar could help drive demand from abroad and keep the economy's engine of growth running. Stronger than expected output will help raise the outlook for domestic growth, potentially raising the outlook for yields and generating greenback support. However, if the linchpin of the recovery begins to falter, a stronger case for further QE can be made. The prospect of more pump priming from the Fed could weigh on the greenback, potentially reversing recent support from safe haven flows.
- ECB Rate Decision – December 2– 12:45 GMT
The actual rate decision by the ECB will be a non-event as forecasts are for the central bank to keep their benchmark rate on hold. The post re-lease remarks from President Trichet will posses market moving potential, as the potential exists for new measures from policy makers. The ongoing debt crisis in the region will assuredly be the focus of media questions, which could lead to an entertaining press conference. If the monetary authority hints that banking troubles for their members is impacting future policy then we could see a strong reaction from the euro. Policy makers have been moving toward removing stimulus, but could see their hand forced by the ongoing events to maintain their efforts or possibly add to them. Any new measures would push out the horizon for a rate hike which could add to prevailing bearish sentiment.
- U.S. Change in Non-Farm Payrolls (NOV) – December 3– 13:30 GMT
The U.S. labor report is always one of the most watched releases and possesses significant market moving potential despite the more global issues of the European debt crisis and tensions in Korea. Forecasts are for the economy to have added 142k jobs in November as the private sector generated positive hiring for an eleventh straight month. A consecutive month of net job growth isn't enough to offset the millions of layoffs during the credit crisis, but may be enough of a positive step to dim the outlook for further QE. A firming labor market will potentially put upward pressure on prices, and with inflation concerns rising, it could fuel interest rate expectations and provide dollar support. However, given that the greenback has recently been benefitting from safe haven flows, a surge in risk appetite could drag on the reserve currency.
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