Weekly Outlook: Jan 18 – 22

Last week was quiet in terms of forex volatility, with significant volumes in the Global stock market. The plunging oil price and China’s interventions to save the domestic stocks expanded in U.S. stocks and added to the global gloom. The sterling continues to be traded near the five and a half year lows versus the dollar, as the BoE policy meeting minutes revealed that external headwinds will slow down further the inflation growth and raise concerns of the overall economic expansion. The U.S. retail sales disappointed the U.S. market, showing a contraction of 0.1% from 0.0% expected and an increase of 0.2% the month before.

[B]THE WEEK AHEAD: 18 Jan – 22 Jan[/B]
The week ahead contains significant fundamental updates that will affect the market! The European Central Bank and the Bank of Canada will have their policy meetings. The New Zealand dollar is prone to the Global Dairy Trade while many countries will release their inflation reports.

The week starts very quietly on [B]Monday [/B]due to U.S. bank holiday. The German Buba monthly report is scheduled for release. Later in the day, New Zealand’s business confidence for the fourth quarter will be out. Overnight, attention turns to China. The domestic GDP growth is expected to show a slight slowdown to 6.8% in Q4 from 6.9% the quarter before. The Chinese industrial production in December is forecasted to have growth by 6.0% versus 6.2% the previous figure.

[B]Tuesday [/B]is the day of inflation rates and other very important fundamental data on the agenda! Early in the morning, the German inflation rate will be preceded to the Eurozone’s that will be released later in the day, no changes are expected from the growth pace at 0.3%. The British inflation rate is also coming out. On a yearly basis, it is forecasted to have grown by 0.2% in December from 0.1%. If the expectations met, would be the best level inflation has been since January. On a monthly basis, the forecast suggests a growth of 0.1%, which is better than the zero percent figure in November. The UK producer price index and the retail price index for December are also coming out.

A while later, the ZEW Survey is predicted to show decreased optimism across Germany and Eurozone as a whole. The current situation in Germany is predicted to drop to 53.8 from 55.0 before while the Economic Sentiment to be slashed almost to the half, 9.0 versus 16.1 before. In Eurozone, the economic sentiment is expected to fell at 27.9 from 33.9 the previous month. Eurozone’s inflation rate in December is expected to meet the preliminary figures of 0.2% growth year-over-year and -0.1% month-over-month. At 12:00 GMT time the BoE Governor Mark Carney will give a speech. The traders will remain tuned to hear governor’s comments regarding the dovish BoE minutes released last week and the inflation rate will be released earlier in the day.

Next in time, the New Zealand Global Dairy Trade will be eyed. The domestic economy is heavily based on the dairy products, this each dairy trade directly affects the country’s currency. Last time the prices plunged by 1.6%, the worst figure since November, dragging the New Zealand dollar down.

Going to U.S., the NAHB housing market index for January is forecasted to remain stable at 61. Later in the day, the New Zealand’s inflation rate for the fourth quarter will be released. On a yearly basis, the consumer prices are expected to have grown by 0.3% as the quarter before, while, on a quarterly basis, the consumer prices are forecasted to have plunged by 0.2% from a rise of 0.3% before.

On [B]Wednesday[/B], there is a slew of important fundamental updates, including UK employment report, U.S. inflation rate and BoC policy meeting! At 09:30 GMT time, the UK Job report will be out. The ILO unemployment rate for the three months to November is expected to remain at 5.2% while the claimant count for December is forecasted to show that unemployed people increased by 2.5k from an increase of 3.9k in November. The average earnings are predicted to continue rising at a healthy pace above 2%.

Going to U.S., the inflation rate is estimated to increase up to 0.8% from 0.5%, a step closer to the Fed’s target of 2%. If the expectations surpassed, the greenback will gain momentum. The building permits are expected to be at 1.200M in December from 1.289M before while the housing starts will increase to 1.197M from 1.173M.

A while later, attention is turned to Canada. The Bank of Canada will have its policy meeting and is expected to leave its benchmark interest rate unchanged. The policy statement will be out as well and will attract attention as the commodity currencies are badly affected by China’s slowdown and plunging oil.

On [B]Thursday[/B], the European Central Bank will decide about their interest rates. Even though not changes to the monetary policy are expected, the shared currency is expected to be affected as the meeting is followed by a press conference of the ECB president Mario Draghi.

The weekly U.S. jobless claims will be out as usual. In Eurozone, the preliminary consumer confidence is anticipated to decrease to -5.8 from -5.7, a disappointing development following the consecutive improvements of the previous two months. During the night, in Australia, the Westpac consumer confidence for January will be eyed.

On [B]Friday[/B], the preliminary manufacturing and services PMI figures for Eurozone and Germany will be closely watched by investors to gauge the sectors’ performance. In Germany, the PMI indexes are expected to reveal that both the services and manufacturing sectors will slightly slow down in January while, in Eurozone, the services sector is forecast to remain stable at 53.2 and the manufacturing to drop marginally to 53.0 from 53.2.

The UK retail sales are expected to show a smaller increase of 4.4% in December from 5.0% before. In Canada, the inflation rate for December and the retail sales for November will hog the limelight. Both of them are expected to have improved. In U.S., the estimate for the Markit Manufacturing PMI is predicted to come out at 51.5 from 51.2 before. The existing home sales are expected to have increased by 8.5% to 5.20M from a decrease of 10.5% to 4.76M in November.