Provisional data from the Organization for Economic Co-operation and Development (OECD) revealed on Tuesday that economic growth in the OECD that comprises of 36 member countries slowed further in the third quarter.

According to the report, GDP in the OECD area grew 0.3 percent, following a 0.4 percent growth in the second quarter.

The pace of growth slowed for a second straight quarter and was the weakest since the third quarter of 2018, when the economy expanded at the same pace.

Among the major seven economies of the OECD, GDP growth slowed significantly in Japan, down to 0.1 percent from 0.4 percent. Meanwhile, the U.S. growth rate was stable at 0.5 percent. In France and Italy, the pace of growth also remained stable at 0.3 percent and 0.1 percent, respectively. In the UK and Germany growth improved to 0.3 percent and 0.1 percent, respectively, after a 0.2 percent contraction in the previous quarter in both countries.

Eurozone growth was stable at 0.2 percent, while the pace of expansion improved in the EU to 0.3 percent.

On a y-o-y basis, growth in the OECD area was stable at 1.6 percent. Among the major economies, the U.S. recorded the highest annual GDP growth of 2.0%, while Italy registered the lowest annual growth of 0.3%.

An opinion poll conducted by Kantar has shown that Prime Minister Boris Johnson's Conservatives have enlarged their lead to 18 points against Labour. The ruling party receives 45%  a leap of 8 points from the firm's previous poll, while Jeremy Corbyn's party holds its ground at 27%.

Nigel Farage's Brexit Party has collapsed to only 2% against 9% in Kantar's previous market research. The right-wing outfit has pulled out candidates from most constituencies, to help the Conservative Party. 

Investors prefer the certainty of Johnson's Brexit deal and the Tories' more market-friendly polices against the uncertainty of a hung parliament and renegotiation of the Brexit deal. The news is positive for the pound. Sterling traders are awaiting a debate between the leaders later today. 

The greenback, in terms of the US Dollar Index (DXY), has failed to extend the daily recovery further north of the 97.90-region.

The index could not sustain the earlier advance to the vicinity of 97.90 and sellers turned up in tandem with fresh concerns on the US-China trade war front – particularly from Chinese officials - amidst increasing skepticism on a positive outcome of the negotiations surrounding the ‘Phase One’ partial deal.

Adding downside pressure to the buck, the US housing sector printed mixed results in October, as Housing Starts expanded below consensus by 1.314M units (or 3.8%) and Building Permits surpassed estimates expanding by 1.461M units (or 5.0%).

Later in the week, the FOMC minutes should grab all the attention on Wednesday seconded by the Philly Fed manufacturing gauge on Thursday and the final November Consumer Sentiment print on Friday.

The index seems to have charted a short-term top in the 98.50-region for the time being. In the meantime, headlines from the US-China trade dispute are expected to remain as the exclusive driver when comes to price action in the global markets. Other than that, investors stay focused on the recent US results in key fundamentals amidst declining yields and the steepening of the 2y-10y yield curve seen as of late. Moving to US politics, markets keep ignoring Trump’s impeachment developments, while the impact on the FX space remains muted. On the broader view, however, the outlook on the greenback still looks constructive on the back of the Fed’s ‘wait-and-see’ mode vs. the dovish stance from its G10 peers, the dollar’s safe-haven appeal and the status of ‘global reserve currency’.

At the moment, the pair is losing 0.01% at 97.82 and faces immediate contention at 97.68 (monthly low Nov.18) seconded by 97.55 (200-day SMA) and finally 97.11 (monthly low Nov.1). On the flip side, a breakout of 98.45 (monthly high Nov.13) would open the door to 99.25 (high Oct.8) and then 99.67 (2019 high Oct.1).

• The economy's in a very good place
• We are very close to achieving our inflation goal
• Inflation is low and stable, unemployment is low
• Fed will stick to data-dependent approach
  
• Monetary policy is now well-positioned

U.S. stock-index futures rose on Tuesday as gains in Boeing’s stock (BA; +1.1%) helped offset steep declines in the shares of big retailers  such as Home Depot (HD; -3.3%) and Kohl’s (KSS; 14.3%), triggered by disappointing quarterly earnings reports..

Global Stocks:

Statistics Canada released its Monthly Survey of Manufacturing on Thursday, which showed that the Canadian manufacturing sales fell 0.2 percent m-o-m in September to CAD57.40 billion, following an unrevised 0.8 percent m-o-m increase in August.

Economists had anticipated a drop of 0.5 percent m-o-m for September.

According to the survey, sales decreased in 10 of 21 industries, representing 62.2 percent of total manufacturing sales. Sales in the petroleum and coal product (-1.9 percent m-o-m) and the motor vehicle parts (-4.3 percent m-o-m) industries accounted for the majority of the decline in September. However, these decreases were largely offset by increases in the machinery (+5.5 percent m-o-m) and motor vehicle (+2.9 percent m-o-m) industries.

Overall, sales of non-durable goods fell 1.0 percent m-o-m in September, while sales of durable goods rose 0.4 percent m-o-m.

(company / ticker / price / change ($/%) / volume)

AT&T (T) downgraded to Sell from Neutral at MoffettNathanson; target $30

The Commerce Department reported on Tuesday the building permits issued for privately owned housing units surged by 5.0 percent m-o-m in October to a seasonally adjusted annual pace of 1.461 million (the highest level since May 2007), while housing starts rose by 3.8 percent m-o-m to an annual rate of 1.314 million.

Economists had forecast housing starts increasing to a pace of 1.320 million units last month and building permits falling to a pace of 1.383 million units.

Data for September was revised to show homebuilding growing to a pace of 1.266 million units, instead of decreasing at a rate of 1.256 million units as previously reported.

According to the report, permits for single-family homes, the largest segment of the market, increased 3.2 percent m-o-m at 909,000 in October (the highest level since August 2007), while approvals for the multi-family homes segment jumped 8.2 percent m-o-m to a 552,000 unit-rate.

In the meantime, groundbreaking on single-family homes rose 2.0 percent m-o-m to a rate of 936,000 units in October (the highest in 9 months), while housing starts for the multi-family climbed 8.6 percent m-o-m to a 378,000 -unit pace.

FX Strategists at UOB Group are seeing the NZD sticking to the ongoing sideline note vs. the USD.

• "24-hour view: While our expectation for NZD to trade sideways was not wrong, the registered range of 0.6390/0.6412 was much narrower than our expected range of 0.6380/0.6430. The quiet price action offers no fresh clues and NZD is likely to continue to trade sideways. Expected range for today, 0.6375/0.6415.
• Next 1-3 weeks: There is not much to add as NZD traded in a quiet manner and closed little changed (0.6398, +0.01%). We continue to hold the same view from last Friday (15 Nov, spot 0.6380) wherein NZD is “expected to trade sideways between 0.6350 and 0.6465 for a while more."

Kohl's (KSS) reported Q3 FY 2019 earnings of $0.74 per share (versus $0.98 in Q3 FY 2018), missing analysts’ consensus estimate of $0.86.

The company’s quarterly revenues amounted to $4.625 bln (+5.9% y/y), beating analysts’ consensus estimate of $4.397 bln.

The company also issued downside guidance for FY 2019, projecting EPS of $4.75-4.95 vs. analysts’ consensus estimate of $5.19 and its prior guidance of $5.15-5.45.

KSS fell to $51.01 (-12.65%) in pre-market trading.

Home Depot (HD) reported Q3 FY 2019 earnings of $2.53 per share (versus $2.51 in Q3 FY 2018), in line with analysts’ consensus estimate.

The company’s quarterly revenues amounted to $27.223 bln (+3.5% y/y), missing analysts’ consensus estimate of $27.514 bln.

The company also issued guidance for FY 2019, projecting EPS of $10.03 vs. analysts’ consensus estimate of $10.13 and revenues of +1.8% yr/yr to ~$110.2 bln vs. analysts’ consensus estimate of $110.76 bln.

HD fell to $229.50 (-3.91%) in pre-market trading.

FX Strategists at UOB Group note that although the bid tone in GBP/USD is expected to persist in the near-term, a test of the 1.3010-region appears unlikely for the time being.

• "24-hour view: While we expected GBP to strengthen yesterday, we held the view “1.2975 is unlikely to come in to the picture”. The subsequent GBP strength exceeded our expectation as GBP popped briefly to a high 1.2985. The combination of lackluster momentum and overbought conditions suggest 1.2985 could be a short-term top. That said, a sustained pullback is not expected. GBP is more likely to consolidate and trade sideways at these higher levels, expected to be within a 1.2915/1.2975 range.
• Next 1-3 weeks: We indicated yesterday (18 Nov, spot at 1.2920) that GBP “could edge higher in the coming days and test the strong 1.2975 resistance”. However, GBP exceeded the 1.2975 level within hours as it popped to 1.2985 before easing off. While upward momentum has picked up, the prospect for GBP to move above last month’s peak at 1.3012 is still not that high. That said, GBP is expected to stay underpinned as long as it stays above 1.2875 in the coming days."

FX Strategists at UOB Group still expectg USD/JPY should be heading towards the 108.00 area in the next weeks.

• "24-hour view: We expected USD to trade sideways within a 108.50/108.95 range yesterday. However, it popped to a high of 109.06 before plummeting to an overnight low of 108.50. The sharp and rapid decline has scope to extend lower even though any weakness is likely limited to a test of 108.40. The next support at 108.25 is likely out of reach. Resistance is at 108.90 followed by 109.05.
• Next 1-3 weeks: USD rose to 109.06 yesterday, not far below our 109.15 ‘strong resistance’ level. As highlighted last Friday (15 Nov, spot at 108.50), only a break of 109.15 would indicate that the current downward pressure has eased. Until then, the bias is still on the downside even though after yesterday’s price action, 108.00 may not come into the picture so soon (the minor support at 108.25 may temporarily check any decline in USD).”

Stefan Koopman, the senior Market Economist at Rabobank, notes that an election will be held on December 12 and the UK Prime minister Johnson is looking for a five-year mandate and a parliamentary majority for his Brexit-deal. It is easier for Johnson to win a parliamentary majority in an election than to win a popular majority in a People’s Vote, Koopman adds.

• “Assuming that clarity on Brexit is the only thing that is broadly desired, party allegiances could potentially break down. The election will be dominated by tactical voting.
• If Johnson’s bet pays off, the new parliament will be able to pass Johnson’s existing deal. “Brexit” will then move to the tricky negotiations regarding the future relationship.
• But if Johnson’s bet backfires, the plot will twist again. A minority government led by Labour could lead the UK to a second referendum, and potentially a Remain outcome.
• The first scenario appears more likely, but opens up the risk of a no-deal Brexit at the end of 2020. A Tory majority may therefore bring plenty of scope for sterling volatility next year.”

FX Strategists at UOB Group expect EUR/USD to extend the ongoing consolidation for the time being.

• "24-hour view: Our view for EUR yesterday was that it “could edge higher towards 1.1075” but we noted “the next resistance at 1.1100 is unlikely to come into the picture”. EUR subsequently rose and touched 1.1090 before easing off. The advance appears to be running ahead of itself and further sustained rise in EUR is not expected for today. That said, a retest of 1.1090 is not ruled out but any up-move is viewed as part of a higher 1.1050/1.1090 range.
• Next 1-3 weeks: There is not much to add to the update from yesterday (18 Nov, spot at 1.1055). As highlighted, the recent weak phase has ended and the “near-term bias on the upside”. For now, we continue to view any advance as part of a 1.1010/1.1115 sideway-trading range even though the prospect for a sustained rise above 1.1115 has increased. All in, the current mild upward pressure is expected to remain intact unless EUR drops back below 1.1030 within these few days."

• Will step up counter-cyclical adjustment for the economy
• Will continue to push real lending rates lower
• Will promote capital replenishment for banks to increase lending capability

The latest survey by the Confederation of British Industry (CBI) showed on Tuesday the UK manufacturers’ order books rose in November but remained significantly below their long-run average.

According to the report, the CBI's monthly factory order book balance increased to -26 in November from -37 in the previous month. Economists had expected the reading to improve to -31.

According to the report, export order book gauge also strengthened on the previous month, reaching -22, up from -41 in October, but also continued to be below the long-run average of -17. Meanwhile, stocks of finished goods jumped to +17 from +11, exceeding the long-run average of +13%.

. Anna Leach, CBI Deputy Chief Economist, noted: “While the thick fog of uncertainty from a No Deal Brexit has lifted somewhat, the manufacturing sector remains under pressure from weak global trade and a subdued domestic economy.”

Bank of America Merrill Lynch Global Research discusses its expectations for this week's FOMC minutes. 

"The minutes of the November FOMC meeting will be released on Wednesday. We expect a generally hawkish tone as FOMC officials agree that the current stance of policy is sufficiently accommodative. The airwaves have recently been filled with comments from Fed officials, including from Fed Chair Powell's testimony to Congress. The Fed believes that rates have been cut enough to provide a cushion against negative shocks. We suspect that there will be a discussion in the minutes of whether the Fed has cut too much. Either way it will be clear that the majority of Fed officials think that policy is supportive. They will likely reiterate the message that there would need to be a "material reassessment" of the outlook in order to adjust rates in either direction. We may get a bit more perspective from the minutes on what constitutes such a change of view. In addition to the discussion about rates and the risks to the economy, we think Fed officials will also talk about the concerns over the implementation of policy, including the optimal size of the balance sheet," BofAML adds.

The outcome of Britain’s election next month poses a binary choice for the nation’s currency, according to the largest U.K. bank.

“Nothing is priced in,” said David Bloom, global head of foreign-exchange strategy at HSBC Holdings Plc. “The political outcome will determine the future of the currency.”

An election result that paves the way to a U.K.-European Union deal on Brexit could send the pound up to $1.45 by the end of next year. Or a no-deal Brexit could see it tumble to $1.10, from just below $1.30 now.

Any resolution is good, Bloom said, either it be another referendum or a Brexit deal. Political wrangling will start to ebb away, the economy could get a fiscal boost and the Bank of England could start considering rate increases. The reverse could see recession fears flare.

Among three election scenarios, a hung parliament -- where neither Prime Minister Boris Johnson’s Conservatives nor opposition leader Jeremy Corbyn’s Labour party gets a majority -- would be the worst for the currency, Bloom said.

According to the report from Eurostat, in September 2019 compared with September 2018, production in construction decreased by 0.7% in the euro area and increased by 0.3% in the EU28. Economists had expected a 2.7% increase in the euro area.

in September 2019 compared with August 2019, seasonally adjusted production in the construction sector increased by 0.7% in the euro area (EA19) and by 0.3% in the EU28. In August 2019, production in construction decreased by 0.8% in the euro area and by 0.5% in the EU28. 

In the euro area in September 2019, compared with August 2019, civil engineering increased by 1.2% and building construction by 0.6%. In the EU28, civil engineering increased by 1.8% while building construction fell by 0.1%.

In the euro area in September 2019, compared with September 2018, building construction fell by 1.0%, while civil engineering increased by 1.1%. In the EU28, civil engineering rose by 2.4%, while building construction remained unchanged.

A “phase one” trade deal between the U.S. and China could be finalized and signed before Christmas this year, according to an executive from bond investment giant Pimco.

“There are obviously issues remaining about agricultural purchase targets, forced technology (transfer) and broader enforcement issues. But I think the view would be to try to resolve something ... by the beginning of December and sign it before Christmas,” John Studzinski, managing director and vice chairman of Pimco, told CNBC.

“And I think Trump sees this as important. He’s gotten a lot of endorsement from American CEOs who want to see some type of stabilization and anchor in this broader relationship and trade dialogue between China and America,” he added.

But reaching a “phase one” deal will not resolve all issues between the two economic giants, noted Studzinski. “Whether we like it or not, we are all witnessing a major event — the first major event, really — since World War II with the need for these two formidable cultures, countries, independent countries to rethink their relationship,” he said. “The world will be a much stronger and stable place if they can find ways to align their interests, rather than trying to compete.”

According to the report from European Central Bank (ECB), the current account of the euro area recorded a surplus of €28 billion in September 2019, compared with a surplus of €29 billion in August 2019. Surpluses were recorded for goods (€27 billion), services (€10 billion) and primary income (€4 billion). These were partly offset by a deficit for secondary income (€13 billion).

In the 12 months to September 2019, the current account recorded a surplus of €321 billion (2.7% of euro area GDP), compared with a surplus of €378 billion (3.3% of euro area GDP) in the 12 months to September 2018. This decline was mainly driven by a smaller surplus for services (down from €118 billion to €77 billion) and a larger deficit for secondary income (up from €139 billion to €160 billion). These developments were partly offset by a bigger surplus for goods (up from €315 billion to €321 billion), while the surplus for primary income remained stable over the same periods at €84 billion.

In the financial account, euro area residents made net acquisitions of foreign portfolio investment securities totalling €234 billion in the 12-month period to September 2019 (down from €335 billion in the 12 months to September 2018). Over the same period, non-residents made net acquisitions of euro area portfolio investment securities amounting to €246 billion (up from €141 billion).

According to the report from ACEA (European Automobile Manufacturers Association), in October 2019, the EU passenger car market grew by 8.7% to reach 1,177,746 units registered. This marked the highest October total on record since 2009. During the same month last year, registrations fell by 7.3% after the WLTP test came into effect, setting a low base of comparison for 2019. As a result, nearly all EU countries posted increases in October, with the exception of Cyprus and the United Kingdom. Four of the five major EU markets noted strong gains, Germany (+12.7%), France (+8.7%), Italy (+6.7%) and Spain (+6.3%), while car sales contracted in the UK (‐6.7%).

From January to October, new-car registrations were down 0.7% compared to the first 10 months of 2018. Although demand increased across the EU in September and October, Germany (+3.4%) remained the only major European market to record growth so far in 2019. By contrast, Spain (-6.3%) and the United Kingdom (-2.9%) saw the strongest declines 10 months into the year, while the Italian (-0.8%) and French (-0.3%) markets have almost recovered to 2018 volumes.

The trade war’s drag on the world’s largest two economies will gradually fade in 2020 as tariffs on imports from China have likely peaked, according to Goldman Sachs Group Inc.

The recent progress toward a partial trade deal and expectations of an extended truce implies that this drag will disappear, which will also benefit the global economy, Goldman Sachs economists wrote in a note. This assumes there is no further escalation of tariffs.

The trade war is currently subtracting roughly 0.5 percentage point from sequential growth in both the U.S. and China, according to Goldman’s estimates.

China’s economy has been on a gradual downward trajectory, with gross domestic product growth slowing further in the third quarter to 6%. Despite efforts by the government and central bank to stimulate the economy, growth is forecast to continue slowing to below 6% next year.

U.S. President Donald Trump said he complained to Federal Reserve Chair Jerome Powell about high U.S. interest rates in a meeting they held at the White House on Monday morning.

"At my meeting with Jay Powell this morning, I protested fact that our Fed Rate is set too high relative to the interest rates of other competitor countries," Trump said on Twitter.

"In fact, our rates should be lower than all others (we are the U.S.). Too strong a Dollar hurting manufacturers & growth!," he said.

Danske Bank analysts provided a brief insight into the key events of note on Tuesday.

“The situation in Hong Kong may increasingly become a market focus as fears grow of a crackdown on demonstrators. A Chinese intervention could hurt global risk sentiment as investors would fear a further deterioration in relations between the US and China, including fears that such tensions could derail the trade negotiations with the US. More specifically, Asian currencies would be vulnerable. Today is set to be another quiet day on the data front with few economic releases of notice; the Fed's Williams (voter, neutral) will speak, however. The Hungarian central bank will publish its rates decision. It's a difficult one for the central bank as headline inflation pressures are abating, while core inflation is climbing again toward the upper part of the band. However, given the still challenging global environment, the central bank will probably lean to the dovish side, though not change its rates.”

• Global economy will remain fragile in 2020 as risks to credit conditions rise.

• Rising political and geopolitical risks are exacerbating slow growth and reducing economies' abilities to respond to shocks.

• Trade uncertainty will continue to disrupt supply chains and weigh on investment decisions.

• Overall global growth will remain lackluster amid a deceleration in the US and China.

• Recession risks will remain elevated in Europe and the US.

• Interest rates to remain low and yield curves to remain flat for several years going forward.

• Does not expect a recession in 2020, recession risks are building amid a backdrop of trade policy uncertainty in global economy.

Bank of Japan Governor Haruhiko Kuroda said that the central bank still has room to lower interest rates further. However, there were limits to how long rates could go down, he said at the parliament.

At the last monetary policy meeting in October, the BoJ maintained its policy rates but tweaked its forward guidance signaling further easing.

In the Semiannual Report on Currency and Monetary Control, Kuroda said the momentum toward achieving the price stability target is maintained and the annual inflation is likely to rise gradually toward 2%. Further, he noted that the economy is likely to continue to be affected by the slowdown in overseas economies for the time being.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1172 (5440)

$1.1140 (2962)

$1.1118 (2034)

Price at time of writing this review: $1.1079

Support levels (open interest**, contracts):

$1.1054 (3767)

$1.1026 (3546)

$1.0989 (3262)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date December, 6 is 101234 contracts (according to data from November, 18) with the maximum number of contracts with strike price $1,1200 (5743);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3064 (5285)

$1.3037 (1564)

$1.3000 (1079)

Price at time of writing this review: $1.2962

Support levels (open interest**, contracts):

$1.2901 (205)

$1.2878 (307)

$1.2849 (1642)

Comments:

- Overall open interest on the CALL options with the expiration date December, 6 is 30421 contracts, with the maximum number of contracts with strike price $1,3000 (5285);

- Overall open interest on the PUT options with the expiration date December, 6 is 32520 contracts, with the maximum number of contracts with strike price $1,2200 (2280);

- The ratio of PUT/CALL was 1.07 versus 1.07 from the previous trading day according to data from November, 18

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.