Forex Weekly Outlook February 13-17 2012

After some temporary attention to the US, the focus certainly returned to Athens in a very busy week, that left the greenback almost unchanged. Apart from Greek news, we have GDP in the euro-zone and Japan, employment figures in the UK and Australia, and the FOMC Meeting Minutes as the main events lined up this week. Here is an outlook on the major market-movers coming our way.

Last week ECB president Mario Draghi’s remark at the ECS press conference provided a loop hole to contribute to the Greek bailout, by suggesting to distribute profits from Greek bonds to Greece. Meantime Greece is in a vicious cycle while the austerity measures posed by the EU paralyze market activity lowering consumption which in turn produces less tax revenues to cover its growing debt. Will Draghi’s suggestion help the struggling nation? Let’s start:

Japanese GDP: Sunday, 23:50. The third quarter preliminary GDP reading anticipated a 1.5% growth due to reconstruction work following the earthquake in March but this positive figure is affected by the slowdown in foreign demand caused by the EU debt crisis. A contraction of 0.3% is expected now, in the fist release for Q4.
Japanese rate decision: Tuesday. The Bank of Japan decided to keep its overnight call rate between 0 to 0.1% amid a persistently strong yen. Furthermore the BOJ lowered its growth estimate for 2012. GDP is now predicted to grow 1.8%-2.1% in 2012, below the previous 2.1%-2.4% prediction. No change in rates is expected
UK inflation data: Tuesday, 9:30. UK CPI declined to 4.2% in December in line with predictions following 4.8% inflation rate in the previous month. This is a step in the right direction for the BOE trying to reduce inflation target to 2.0% although this goal may take a long time. A further decline to 3.6% is expected.
German ZEW Economic Sentiment: Tuesday, 10:00. German analysts’ sentiment made a big leap in the right direction, climbing to-21.6 in January from-53.8 in December. This may be a turning point for the EU economy following a series of declines last year.Germany’s economic strength together with the European Central Bank’s massive cash injection resulted in higher than expected optimism. Another improvement to -11.6 is forecasted.
US Retail Sales: Tuesday, 13:30. Core retail sales declined unexpectedly by0.25 in December while expected to increase 0.3%. Meantime Retail sales increased less than predicted gaining 0.1%. Nevertheless Annually figures for 2011 show a record sales of $4.7 trillion, a gain of nearly 8% from 2010. Core retail sales are predicted to rise 0.6% while retail sales are predicted to edge up 0.8%.
UK employment data, Wednesday, 9:30. The number of people claiming unemployment benefits increased less than expected reaching 1200 in December while economists expected a rise of 9,100 however the unemployment rate increased from 8.3% in November to 8.4% in December. An increase to 3,300 is expected now.
Euro-zone Flash GDP: Wednesday, 10:00. The fourth quarter was quite weak in Europe. It most probably saw the area contract, by 0.4%. The squeeze in economic activity will put Italy in an official recession. For Germany, France and the area as a whole, this is expected to be the first quarter of contraction.
US TIC Long-Term Purchases: Wednesday, 14:00. U.S. Treasury International Capital jumped more than predicted in November reaching USD 59.8 billion after USD8.3 billion in October. Economists expected a lower figure of USD27.3 billion in November. Another rise to US62.3 billion is anticipated.
US FOMC Meeting Minutes: Wednesday, 19:00. The last FOMC meeting saw the Federal Reserve release individual members’ forecasts, and also extend the low rate commitment to late 2014. In addition, Ben Bernanke hinted about QE3 in the press conference. We will now see if the dovish FOMC is indeed leaning towards action in March, although chances are still small.
Australian employment data: Thursday, 0:30. Australian labor market contracted 29,300 jobs in December following 7,500 drop in November. This reading was contrary to the 10,200 gain expected by analysts. Meantime unemployment rate was maintained at 5.2% better than the increase to 5.3% expected. The job market is expected to add 10,900 jobs while unemployment rate is expected to reach 5.3%.
US Building Permits: Thursday, 13:30. The number of building permits did not change from November reaching679,000 in line with predictions. On a yearly base there was a 7.8% gain from December 2010. The number of building permits is expected to reach 680,000.
US PPI: Thursday, 13:30. Producer Price index declined in December by 0.1% due to lower prices of gasoline and food costs. Economists expected a 0.1% gain Meantime Core PPI increased by 0.3% amid higher automobile prices. A rise of 0.3% is expected now.
US Unemployment Claims: Thursday, 13:30. The number of unemployed Americans filing initial jobless claims dropped better than predicted last week to 358,000 from a revised 373,000 in the prior week. Economists expected claims to reach 369,000. This reading verifies the ongoing improvement in the US job market and economic activity with renewed hiring and low pace of layoffs. A rise to 364,000 is anticipated.
Ben Bernanke speaks: Thursday, 14:00. Ben Bernanke, Chairman, Board of Governors of the Federal Reserve will give a speech at the Federal Deposit Insurance Corporation (FDIC) one-day conference in Arlington on “The Future of Community Banking” His words cause great volatility in the market. He might provide more hints towards the meeting in March.
US Philly Fed Manufacturing Index: Thursday, 15:00. Manufacturing activity declined in the U.S. Mid-Atlantic region dropping to 7.3 in January from 10.3 in November. This reading was less than the 10.7 expected by analysts. Nevertheless this is a positive figure indicating expansion in the manufacturing sector. Another decline to 8.5 is expected.
US inflation data: Friday, 13:30. Consumer price inflation was flat in December the same as in amid lower energy costs. Core CPI excluding food and energy gained 0.1% in line with predictions, after rising 0.2% in November. These readings enable the Fed to continued loose monetary policy. Both CPI and Core PI are expected to increase 0.3%.

*All times are GMT.

That’s it for the major events this week. Stay tuned for coverage on specific currencies.

Anat Dror

Anat Dror Senior Writer I conceptualize, design and create multi-lingual websites. Apart from the technical work, my projects usually consist of writing content for these sites in English, French and Hebrew. In the past, I have built, managed and marketed an e-learning center for language studies, including moderating a live community of students. I've also worked as a community organizer Anat's Google Profile

View all posts by Anat Dror