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G10 Macro Rates Market Analysis – Weekly Review – 23rd Dec 2019

Monday, December 23, 2019

With the Pacific G10 Macro Rates Team

Global Macro Overview
As one would expect going into the seasonal holidays, last week was a relatively quiet week for the financial markets.  There was no new information and the data has been broadly consistent with the resilient economic growth.

North America
US: As was expected, Donald Trump was impeached by the House with a couple of representatives walking the floor (three Democratic Representative voted against and one Republican Representative voting for impeaching The President). Financial markets did not react to the news, as it is widely expected that the impeachment process will stall in the Senate.

The third revision to Q3 GDP didn’t produce any big surprises or changes apart from Personal Consumption that was revised up to 3.2% from 2.9%. Regional Feds surveys were mixed, Empire came in at 3.5 (4 exp., 2.9 prev.), Kansas City Manufacturing at -8 (-3 prev. and exp.) and Philadelphia Fed business outlook was at 0.3 against the expectations of 8 (10.4 prev.). Initial and Continuing claims picked up a bit but still remain at cyclical lows.

Canada: Housing data was mixed, as Housing Starts and Building Permits increased to 1365k and 1482k both above expectations but existing home sales came in weaker at 5.35m. PCE numbers for November were slightly above the expectations with core PCE at 1.6% yoy (1.5% exp.) and headline PCE at 1.5% yoy (1.4% exp.). Finally, the University of Michigan Consumer sentiment improved slightly to 99.3 (99.2 exp. and prev.) while 5-10y inflation expectations dropped to 2.2%.

Eurozone: December PMIs were broadly unchanged. IFO survey in Germany showed increased positivity of German businesses as the current assessment and outlook improved. Weaker Manufacturing PMI in France was compensated by a stronger Services component leaving Composite number at 52. In addition, both business and manufacturing confidence has improved in December. Consumer confidence in Italy was slightly stronger at 110.8 (109 exp., 108.5 prev.) and manufacturing confidence improved slightly in line with expectations.

SwedenIt was a quiet week on the data front but with one major event – Riksbank abandoning negative rates by hiking from -25bps to 0 as expected. As expected they strengthened the message of unchanged rates for a foreseeable future.

Norway: Norgesbank kept interest rate unchanged, however still kept an option of an interest rate increase in 2020 but ruled out doing it in Q1. The Unemployment rate increased slightly to 2.2% from 2.1% as expected.


PMI numbers were unchanged in December with Composite at 49.8. The trade balance has improved in November, but the underlying split wasn’t that positive – exports improved to -7.9% yoy from -9.2% but imports dropped to -15.7% from -14.8% indicating more pain from the October sales tax increase. CPI data was broadly in line with expectations at 0.5% yoy and 0.8% yoy core number.


Boris Johnson signed a law that will not allow trade deal negotiations with the EU to extend beyond 2020, sending GBP down 3% to erase all post-election gains. PMI data was weaker across the board and all components coming in below the expectations. The unemployment rate stayed at 3.8% as employment began increasing again and average earnings continued growing around 3.5%. CPI and RPI data surprised to the upside, driven by the food inflation – stronger currency over the last couple of months should cap the potential upside for food inflation. November Retail Sales were weak and the final release of 3Q GDP numbers was slightly stronger at 1.1% yoy growth (1% exp. and prev.) driven by higher CapEx and much weaker imports.

Australia: PMI survey was weaker with Composite sliding to 49.4 from 49.7. However, the highlight of the week was employment data that showed strong 40k increase in overall employment, however part-time employment was the major driver. Unemployment decreased to 5.2% from 5.3%, which should provide some long-awaited positive numbers. Interest rates increased above last week’s highs and completely reversed the rally from the dovish minutes from the last RBA meeting.

New Zealand: Strong 0.7% qoq increase in 3Q GDP was followed by a 1.6 % increase in credit card spending, painting a positive outlook for the economy in the coming months.

For further information on the Pacific G10 Macro Rates team, their experience and strategy please see below           

Read the Strategy Information Sheet

IMPORTANT INFORMATION: Issued and approved by Pacific Capital Partners Limited, a limited company registered in England and Wales, authorised and regulated by the Financial Conduct Authority . The information contained herein is not approved for use by the public and is only intended for recipients who would be generally classified as investment professionals. Information or opinions contained in this article do not constitute an offer to sell or a solicitation, or offer to buy, any securities or financial instruments or investment advice or any advice or recommenda

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