Forex Weekly Outlook Jan 28 – Feb 1

The euro continued moving higher and the yen was eventually on the back foot in another volatile week. As the first month of the year draws to an end, we have quite a bit of excitement: A Fed decision after QE4, the first release of Q4 GDP and the all important Non-Farm Payrolls are the highlights. Here is an outlook on the main events at hand.

Last week German,Economic Sentiment  rose in two separate surveys, countering other worrying German data..Will Germany reclaim its position as the leading force in the EU? In the US, a second consecutive drop of jobless claims to new 5 year lows certainly provide hope for the world’s No. 1 economy. Worries now come from the UK, which couldn’t sustain a recovery. The “currency wars” are intensifying, and we should see more action.

Let’s Start

1. US Durable Goods Orders: Monday, 13:30. U.S. core durable goods orders excluding Transportation edged up unexpectedly to a seasonally adjusted 1.6% in November, from an upwardly revised reading of 1.9% in the preceding month.  Analysts expected Core durable goods orders to drop -0.2%. A rise of 0.8% is predicted.
2. US Pending Home Sales: Monday, 15:00. Contracts to buy existing U.S. homes climbed 1.5% in November to their highest level in 2-1/2 years, indicating the housing market is strengthening. This reading was preceded by a 5.0% surge in October, missing predictions for a 0.3% contraction. A smaller increase of 0.5% is forecasted.
3. US CB Consumer Confidence: Tuesday, 15:00. U.S. consumer confidence faltered in December, dropping to 65.1 from 71.5 in November, amid fears of sharp tax increases and government spending cuts following the “fiscal cliff.” A further decline to 64.5 is anticipated.
4. US ADP Non-Farm Employment Change: Wednesday, 13:15. ADP non-farm private jobs growth reported a strong addition of 215,000 jobs in December ,following 148,000 in November, way above market forecasts of 134,000. The improvement in the manufacturing sector contributed to employment gains. An addition of 164,000 job is expected this time.
5. US Advance GDP: Wednesday, 13:30. The US economy advanced by an impressing 3.1%, in the third-quarter,  higher than expected and well above second-quarter growth of 1.3%. Despite the modest growth rate the ending indicated positive momentum with a rise in personal consumption. An expansion of 1.3% is expected now.
6. US FOMC Statement: Wednesday, 19:15.  The Federal Reserve is not expected to make any policy changes this time, after making a big move last time. The recent decision was dramatic: more open ended bond buying and a change in guidelines towards employment and inflation targets. While some members saw a potential easing in easing towards the end of the year, this does not reflect the dovish stance of most members,including Bernanke. If nothing surprising happens rates will probably remain low until 2015, and less QE isn’t due until 2014.
   The focus for this rate decision will be the view about the economy: the Fed could acknowledge the ongoing slow recovery and the lower level of political uncertainty as positive factors, but without any hint on policy change anytime soon..
7. NZ rate decision: Wednesday, 20:00. Reserve Bank of New Zealand maintained the official cash rate at 2.5%, as predicted. It reported a slowdown in economic growth but forecasts an improvement within the next two years. Domestic demand s expected to increase but inflation is anticipated to remain low. No change in rates is anticipated as worries about the economic strength weigh.
8. Canadian GDP: Thursday, 13:30. As Canada’s economy crawled sluggishly into the fourth quarter of 2012 with a mere 0.1% growth rate in October, following a flat reading in the previous month indicating a slowdown in economic growth. Growth was reported in wholesale, retail, as well as oil and gas extraction. A gain of 0.2% is expected this time.
9. US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial unemployment claims plunged last week to the lowest level in five years, reaching 330,000, providing further evidence that employers are maintaining jobs and may also accelerate hiring. The previous week’s reading registered 335,000 new claims. The release missed analysts forecasts of 359,000 claims. An increase of 355,000 is forecasted.
10. US Non-Farm Employment Change: Friday, 13:30.  The US economy probably gained around 150K jobs in January. Recent figures continue the same trend of slow and steady growth. It is important to note that this NFP publication is made on the first day of the month. This means that less hints will be available to analysts. So, there is a higher chance of surprise, and we will probably see a bit more volatility than in previous releases.  
11. US Unemployment Rate: Friday, 13:30. The unemployment rate remained unchanged in December at 7.8%. Unemployment rate improved in 2012 from 8.3% in January to 7.8% in December. Long-term unemployment also improved.  Unemployment rate is expected to remain 7.8% .
12. US ISM Manufacturing PMI: Friday, 15:00. The U.S. manufacturing sector flipped to expansion in December reaching 50.7 from 49.5 in November, indicating expansion rising hopes for a further improvement in 2013. Economists expected the December PMI to improve to 50.2. A further rise to 50.8 is anticipated now.

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

*All times are GMT.

Further reading:

• For EUR/USD, check out the  Euro to Dollar forecast.
• For the Japanese yen, read the  USD/JPY forecast.
• For GBP/USD  (cable), look into the  British Pound forecast.
• For the Australian dollar (Aussie), check out the  AUD to USD forecast.
• For USD/CAD (loonie), check out the  Canadian dollar