Turkish assets have revalued in the week to December 9 amid FX sale of public institutions, Economy Coordination Board decisions to boost economic activity inside as well as ECB decision and revaluation of dollar inside. CDS spreads which show the risk premium in the country have eased from 306.2 in December 2 to 288.8 atDecember 9 close. BIST100 ended the week at 75,727 on a 3.2% gain (4.8% in USD terms) while USD/TRY closed at 3.456 on 1.5% drop. Bond yiels in line with CDS retracted albeit slightly, with 2y benchmark bond yields easing to 10.83% from 10.88% a week ago, 5y and 10y benchmark bond yield coming down to 11.19% and 11.23% from 11.25% and %11.31%.
Main data releases to be followed inside this week will be GDP growth, balance of payments, unenployment rate, budget and Treasury auctions. Markets will focus on FOMC meeting to be held on Tuesday and Wednesday at the outside. You can find the details of main releases and events below.
Turkey – 10:00 GDP Growth (3Q16): 3Q16 GDP realizations will be announced by Turkstat on Monday at 10:00 a.m. Market consensus is 0.3% y/y increase however it may deviate from consensus as Turkstat will announced a major revision and whole GDP series and growth rates may change. Barring any revision, 0.3% GDP growth will point to a significant slow down the previous quarter’s 3.0% GDP growth.
Turkey – 10:00 Balance of Payments (Oct): The other important release of the week in Turkey will be October balance of payments to be announced by the CBRT at 10:00 (GMT+3). Market consensus for current account deficit is $1.7 bln. This would carry 12M trailing deficit from $32.4 bln in September to $33.8 bln in November. Data has no material market impact however surprisingly low or high realization may lead to a volatility in exchange rate.
Turkey – Treasury Auctions (Dec): Treasury will hold 3 auctions this month on Monday and Tuesday to cover its monthly redemptions. It will issue 5y benchmark bond (22.09.2021) on Monday and 2y benchmark (11.07.2018) and 9y benchmark bond (11.02.2026) on Tuesday. It has TRY5.3 bln redemption, of which TRY4.5 bln is to the market. Borrowing target is TRY5.1 bln, which stands for a total rollover ratio target of 96.2. Demand in the auctions are not expected to be low however borrowing costs may increase compared to same maturity auction.
China – 5:00 Industrial Production (Nov): Indicators providing hint over the growth performance in China in the second half of the year is of utmost importance for global financial markets. Industrial production to be announced at 5:00 a.m. Turkish time is one of those. Note that Chinese economy having grown 6.7% in the first half of the year have met the expectations. Market expects industrial production to post 6.1% growth over a year ago in November, following 6.1% y-o-y growth in October. Market will welcome the acceleration in production performance in China.
China – 5:00 Retail Sales (Nov): Another important indicator regarding Chinese economy is retail sales. Market expects October retail sales to post 10.2% y/y whereas it was 10.0% a month ago. Data may remain secondary as market would focus on industrial production to be announced at the same time however should both industrial production and retail sales comes better than market consensus, then they may add to the positive sentiment prevailing in global financial markets.
Eurozone – 12:00 Industrial Production (Oct): Industrial production in Eurozone is not likely to provide an encouraging picture in October according to market expectations. Consensus is 0.2% rise over previous month in October in seasonally adjusted terms while it stands for a y/ y increase of 0.9%. Production growth in the previous month was 1.2% y/y. Such realization would lead to a selloff in Eurozone assets, primarily in Euro. Conversely, a stronger standing than market consensus would be appreciated and lead to a pickup in the parity.
Turkey – 10:00 Private External MLT Debt (Oct): Medium to long term debt of the private sector will be announced on Tuesday at 10:00 Turkish time. Data is important as private sector borrowing has increased at an accelerated pace in the last few years amid ample liquidity in global financial markets and is a source of vulnerability now. Level of debt in September was $207.5 bln while it was $195.7 bln at the end of 2015.
UK – 12:30 Inflation (Nov): CPI inflation in UK will be announced on Tuesday at 12:30 Turkish time. Market expects CPI inflation to be 0.1% m/m while y/y inflation is expected to ease to 0.9% from 1.1%. Core inflation in the meantime is expected to decline to 1.2% from 1.3%. Though the level of inflation is not so high any deterioration will not be considered well for British economy after Brexit and may lead to a selloff in financial markets. This may end up with a lower GBP/USD as well.
Euro Zone – 12:00 ZEW Expectation Survey (Dec): There is no consensus estimate for the ZEW Index which measures the expectations of financial sector in Eurozone but market will focus on whether the realization in December will exceed the previous realization at 15.8. A better than expected outcome may support EUR/USD parity.
Turkey – 10:00 ST External Debt (Oct): Treasury will announce short term external debt on Wednesday at 10:00 a.m. local time. Short term debt is closely followed as its increase confirms unhealthy composition of financing structure. Debt stock as of September was $103.3 bln while it was $102.7 at the end of 2015
ABD – 16:30 Perakende Satışlar (Kas): ABD’de ekonomik aktivitenin en önemli göstergelerinden olan ve piyasa tarafından yakından takip edilen perakende satışlar verisi Çarşamba günü saat 16:30’da yayınlanacak. Otomobil ve gaz hariç çekirdek perakende satışların Kasım ayında bir önceki aya göre %0.5 artış göstermesi bekleniyor. Bu oran Ekim ayında da %0.6 idi. Beklenenden yüksek bir gerçekleşme dolar endeksi üzerinde pozitif etkide bulunacaktır.
US – 16:30 Retail Sales (Nov): Retail sales which is widely followed by markets to assess domestic trade activity in US will be announced on Wednesday at 16:30 Turkish time. Core retails sales which exclude automobile and gas is expected to post 0.5% growth in November over previous month whereas it was 0.6% in the previous month. Such realization will be considered negative by markets.
US – 17:15 Industrial Production and Capacity Utilization (Nov): Industrial production will be announced on Wednesday at 17:15 as another important data release of the week. Market expects industrial production to post 0.2% m/m drop in November whereas production grew was flat in October. Capacity utilization in the meantime is expected to slightly edge down in November to 75.1% from 75.43 a month ago. Rise in production growth would encourage market participants who expects more rate hike from Fed. We may see dollar index to edge up should realization comes better than expectations.
US – 22:00 FOMC Meeting (Nov): As most widely expected event of the week FOMC decision will be revealed on Wednesday at 22:00 local time. It is almost certain that Fed will hike Fed funds rate by 25 bps however Fed’s new projections on macro aggregates and how much rate hike Fed governors expect for next year will be quite important. 3 or more rate hike would support acceleration in DXY and bond yields.
Japan – 7:30 Industrial production (Oct): Industrial production which will be announced on Monday at 7:30 Turkey time is expected to post 1.3% y/y drop in October. Deceleration was 1.5% in September. Higher weakness than expected would be considered bad by markets and may lead to sell off in USD/Yen parity.
Turkey – 10:00 Unemployment Rate (Sep): September unemployment rate will be announced by Turkstat on Thursday at 10:00 a.m. local time. Market expects unemployment rate to rise to 11.3% in September from 10.3% registered in the same month of previous year. Seasonally adjusted unemployment rate in August was 11.4% and though there is no market consensus, weak private demand might have hurt employment in the third quarter. Data may have negative market impact if it comes in line with market consensus.
Turkey – 11:00 Central Government Budget Balance (Nov): Ministry of Finance will announce November central government budget balance on Thursday at around 11:00 local time. There is no consensus about either budget or primary balance but market will follow whether realizations will meet last year’s strong performance. Budget balance generated TRY798 mln overall and TRY4.7 bln primary surplus in November 2015. Any realization lower than last year will lead the market think that the government may miss revised target of 1.6% as well. This may hurt market sentiment and push bond yields higher. Data should not be expected to have any material impact over exchange rates.
Eurozone – 11:00 Manufacturing and Service PMI (Dec): Data will be important for the direction of EUR/USD which slid below 1.06 with ECB Governor Draghi’s statements that extended the deadline for the end of bond buying program. Preliminary manufacturing PMI in November to be announced at 12:00 local time on Thursday is expected to remain flat at 53.7 while service PMI is expected to ease to 53.7 from 53.8 a month ago. Any number better than previous month will be considered positive for growth and support EUR/USD.
UK 15:00 BoE Rate Decision (Dec): Bank of England will announce its monetary policy decision on Thursday at 15:00 Turkey time. Market does not expect a change in either 0.25% policy rate or 435 bln GBP bond buying program however a surprising revision would lead to a volatility in GBP/USD.
Turkey – 14:30 CBRT Expectation Survey (Dec): Monthly expectation survey which is held by the CBRT will be announced on Thursday. Market will follow how market participants and business environment revised their inflation expectations following sharp depreciation in the currency. End year inflation expectation was 7.80% in the previous survey. Medium term inflation expectations will be more important for the conduct of monetary policy. November survey revealed that 12 and 24 forward looking inflation expectations lie at 7.87% and 7.27% respectively. Any pick up on those rates will be a warning for the CBRT for rate hike.
ABD – 16:30 TÜFE Enflasyonu (Kas): ABD’de Fed kararlarının en önemli girdisi haline gelen tüketici enflasyonu Perşembe günü Türkiye saatiyle 16:30’da açıklanacak. Piyasa Kasım ayında aylık enflasyonun %0.2 olarak gerçekleşmesini bekliyor. Yıllık enflasyonun ise %1.6’dan %1.7’ye yükselmesi, çekirdek enflasyonun da %2.1’den %2.2’ye artış göstermesi bekleniyor. Beklenenden yüksek bir enflasyon dolar endeksi ve tahvil faizlerinin yükselmesine, Fed’den faiz artışı beklentilerinin daha fazla fiyatlanmasına neden olacaktır.
US – 16:30 CPI Inflation (Nov): CPI inflation in US will be the one of the main releases of the week for global financial markets. As inflation is one of the two pillars of Fed’s dual mandate, market will seek a hint out of next Fed moves. Market consensus is 0.2% m/m headline realization but y/y inflation is expected to pick up to 1.7% in November from 1.6% a month ago. Core inflation on the other hand is also expected to rise from 2.1% to 2.2%. Acceleration in headline inflation would confirm investors’ expectation that Fed will hike more than two times policy rates next year. This would push DXY higher. Conversely, a worse than expected realization would delay Fed rate expectations and support EM asset prices.
US – 15:30 Real Average Weekly Earnings (Nov): As another widely followed inflation indicator, real average weekly earnings in November will also shape market expectations about Fed’s next moves. There is no consensus about the data but market will follow whether November realization will exceed October outcome of 0.9%.
US – 15:30 Philadelphia Fed Business Outlook (Dec): Though it is somewhat a second tier data, Philadelphia Fed shows the sentiment of business environment. Market expects the Philly Fed index to rise to 9 in December from 7.6 in the previous month. One should not expect a dramatic market impact even though data deviates from expectation.
US – 16:30 Empire Manufacturing (Dec): At the same week with Philly Fed, another indicator regarding economic activity, Empire Manufacturing index will be announced in US. Index level is expected to recover to 3 in December from 3.0 a month ago. Data may have limited positive impact over dollar index if it shows some recovery as suggested by market consensus.
US – 14:30 Initial Jobless Claims (Dec 10): Initial jobless claims which showed the lowest level since 1973 in Nov 12 with 235k is expected to stay at 256k in the week to Dec 10 whereas it was 258k in the previous week. A better than expected amount will convince investors that initial jobless claims have dropped to a lower level permanently. Recall that initial claims have been under 300,000 for 89 straight weeks, the longest streak since 1970. Hence, a realization lower than 250k would have a positive market impact on dollar and US bond yields.
US – 17:45 Markit Manufacturing PMI (Dec): Preliminary numbers for December manufacturing PMI in US suggests a flat realization compared to October. Index level stood at 53.4 in October which is expected to decline to 53.8 from 54.1 in November. Data better than expectations may lead to further increase in DXY.
ABD – 24:00 Hazine Uluslararası Sermaye Girişi (Eki): Bu hafta Perşembe günü Türkiye saatiyle 24:00’te açıklanacak veri ABD kur ve tahvil piyasasına etkisi açısından büyük önem arz ediyor. Veri, ABD hisse senedi piyasasına giren yabancı sermaye ile Hazine ve özel sektör tahvillerine girişleri gösteriyor. Fed’den faiz artışı beklentisi ile ABD tahvil faizlerinde yaşanan yükseliş veriyi daha önemli hale getiriyor. Veri ile ilgili bir piyasa beklentisi yok ancak Eylül ayında toplam net yabancı sermaye çıkışı 152.9 mlr $ olurken 26.2 mlr $ uzun vadeli sermaye çıkışı yaşandı. Ekim ayı verisinin Eylül gerçekleşmesinin üzerinde gerçekleşmesi DXY endeksi ve tahvil faizleri üzerinde yukarı yönlü etki yaratabilir.
US – 24:00 Net Treasury International Capital Flows (Oct): Net TIC flows which will be announced on Thursday at 23.00 Turkish time is quite crucial for the fate of US exchange rate and bond markets. Data shows the foreign inflows to US equity, Treasury bond and private corporate bond markets. Rise in global bond yields keep data important for markets. There is no consensus estimate for the data however net foreign inflows to US assets in September has been $152.9 bln while long term net outflows were $26.2 bln. Acceleration in inflows would put upward pressure over dollar and hence support depreciation in EM currencies. On the contrary we may see further pick up in US bond yields if we see outflow from US assets continue.
Japan - 3:30 Nikkei Manufacturing PMI (Oct): Japan manufacturing PMI to be announced on Monday at 3:30 is expected to remain flat at 51.3. Note that an index level above 50 points to an expansion in economy whereas below 50 points to contraction.
Eurozone 12:00 CPI Inflation (Nov): CPI inflation in Eurozone will be announced on Friday at 12:00 Turkey time. M/M inflation is expected to be -0.1% in November. Y/Y inflation is expected to remain flat at 0.6% compared to previous reading. Core inflation in the meantime is also expected to show no change from previously announced 0.8%. Any surprise, though not expected, may lead to a volatility in EUR/USD.
Eurozone – 12:00 Trade Balance (Oct): Trade balance in Eurozone which is quite important for the fate of EUR/USD parity will be announced at 12:00 Turkish time on Friday. Market expects trade balance to generate €25.0 bln surplus in October in seasonally adjusted terms. Seasonally adjusted balance in the previous month was €24.9 bln surplus. Any realization higher than market consensus would lead to an appreciation in Euro.
US – 16:30 Housing Starts (Nov): Housing starts as a critical indicator of economic strength which reflects the number of privately owned new houses on which construction has been started is an important ingredient in market players’ expectation of next Fed move. In November, market expects housing starts to post 7.8% drop over previous month following 25.5% increase in October.
US – 16:30 Building Permits (Nov): Building permits as another key indicator of demand in the housing market measures the change in the number of new building permits issued by the government. It is expected to post a m/m drop of 1.6% in November following 0.3% rise in October. Market impact would be negative for EMs but positive for US should indicators point to further recovery in US housing market. This would support dollar index and lead to a sell off in bond market.
03 Jul 18 (Tue)
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