Plenty of data from the US this week should help us make sense of the record highs for equities. Traders always like to get ahead of the curve, and with expectations that Trump will feed corporate America with healthier returns, the market only knows one way. Up! Important Manufacturing, Services and Factory orders plus the FEDs Beige Book are due early on in the week, with Jobs numbers rounding off the week on Friday. The FED will keenly watch the jobs data, with last month’s data indicating that the economy may be slowing down too fast. Expectations are for a low Non-Farm payroll gain of only 12,000. In the EU, ECB Lagarde steps up to the plate to discuss the state of the economy. The aggressive lowering of rates may end as monthly EU inflation climbed to 2.3%. The core rate was steady at 2.7%. However, the market is deeply divided as to whether the ECB will move from a dovish outlook to neutral or even hawkish. The EUR is currently the worst-performing currency of the G10 group of nations. Over the weekend, NBS Manufacturing rose to 50.3 in China, gaining 0.2 points. This is the highest read since April and the second straight month of an increase in factory activity. This is a good sign as the September PBoC initiatives are starting to pay some dividends. In Australia, we get a good look at what the economy is doing with GDP data out on Wednesday. QoQ has been flat lining for the last three months, with the last read showing the economy is limping ahead. The gain was the lowest read since Q4 2020, and expectations remain subdued. Hopefully, this will help The RBA over the line with a rate cut before Christmas.

But first, let’s take a look at Australian GDP. It’s frustrating that the RBA has not yet moved on the lowering interest rates. There is a concern that keeping rates at these levels will promote softness in the economy, which is starting to show. Australia is dependent on the growth of its trading partners. Concerns about China seem to be justified and concerns about potential tariffs imposed by the US remain uncertain. But domestic demands is starting to falter as shown by GDP. Quarter-on-quarter (QoQ) GDP growth has been lacklustre over the past three months, and we expect another weak reading this time. General consensus suggests that QoQ Growth is likely to show a minimal increase or stagnation, reflecting subdued domestic demand. And Year-on-Year (YoY) Growth is expected to remain soft, well below long-term trends. The last GDP report showed the weakest growth since Q4 2020, and expectations remain muted, as indicators like retail sales and construction activity continue to signal sluggishness. High Inflation and persistent price pressures have eroded consumer purchasing power and slowing household consumption.

The RBA’s aggressive rate hikes have dampened borrowing and investment activity, particularly in the housing market.

The Australian GDP report this week is expected to show minimal growth, highlighting the challenges the economy faces amid high inflation, rising interest rates, and global uncertainty. While some sectors like resources and tourism may provide pockets of resilience, the overall picture is likely to remain subdued. The data will play a pivotal role in shaping the RBA’s policy decisions, making it a key event for investors and policymakers alike. Another weak read should prompt the RBA into lowering rates.

Australian GDP

 (Trading Economics) 

In the US this week we get jobs data a focus that provides a good insight into the state of the US economy. A modest increase in Non-Farm Payrolls (NFP) is expected of around 12,000–50,000 jobs added, which is well below the robust gains last month and earlier this year. Last month’s jobs data did show signs of slowing momentum, raising concerns that the economy could be cooling faster than anticipated. A low figure could reinforce the narrative of a slowing economy, while a stronger-than-expected print may suggest resilience in the labour market.  recent economic data paints a picture of robust growth. 

The jobs data will offer insights into the broader U.S. economic landscape. Weak hiring may confirm that the economy is cooling as higher interest rates dampen demand. This could ignite recession risks into 2025. Whilst the Wage data will be critical in assessing whether inflationary pressures are easing or remain persistent. Market reaction to a softer number may be two-fold. On one hand traders could see an elevated chance of a recessions and decide to take profits or see a weaker jobs report potentially see a less aggressive Fed. Conversely, stronger data may lead to equity market declines, particularly in rate-sensitive sectors like technology.

In the EU across the Atlantic, European Central Bank (ECB) President Christine Lagarde will take the stage to discuss the state of the European economy. The ECB has aggressively lowered interest rates in recent months, but with EU inflation rising to 2.3% in October—while the core rate remains steady at 2.7%—there are growing questions about the central bank’s next steps. Market participants are split on whether the ECB will shift from its dovish stance to a more neutral or even hawkish position, especially as inflationary pressures build. The euro, meanwhile, continues to languish as the worst-performing currency among the G10 nations, reflecting the region’s ongoing economic struggles and investor skepticism.

In China, there are glimmers of hope as manufacturing activity continues to recover. Over the weekend, the National Bureau of Statistics (NBS) reported that the Manufacturing Purchasing Managers' Index (PMI) rose to 50.3, up 0.2 points from the previous month. This marks the highest reading since April and the second consecutive month of expansion, signaling that Beijing’s September stimulus measures—implemented by the People’s Bank of China (PBoC)—are starting to bear fruit. The recovery in factory activity is a positive sign for the Chinese economy, which has been grappling with challenges from a real estate slowdown and weaker global demand.

This week in the United States spotlight will be on November jobs report as mentioned  and speeches from Federal Reserve officials, including Chair Powell. Market attention will also be focused on JOLT’s job openings, ISM Manufacturing and Services PMI data, Michigan Consumer Sentiment Index, factory orders, and foreign trade figures. Elsewhere, Q3 GDP growth rates from South Africa, Brazil, and Australia, alongside unemployment rates for the Euro Area and Canada will be released. Germany will release reports on factory orders and industrial production. 

On the position front, we are still … out on …, … equity positions (ASX … and SP…). Wheat, we remain … but are still happy to … off for a longer time. We have done well out of the gold and silver trades and remain with this trade. We are … AUD, which is not performing.

Trade Focus:

AUDUSD

Fundamentals:

The interest rate outlook for the Australian economy looks steady although we suggest a dovish approach the RBA seems resilient to change. Other parts of the domestic economy look subdued but if China shows signs of a recovery and demand for inputs picks up then the AUD will be bought…

Technical Analysis:

We have included two charts one is a weekly and the other is a daily. It is clear from the weekly chart that we are testing the lower end of the trend. The overall picture is one we can sum up as a breach and pull back. We are amidst a pull back and have been for some time and suffered a false break to the topside…

Support              …

Resistance         …

Momentum        …