Forex Weekly Outlook – February 1-5 2010

After the surprising American GDP, the first week of February is loaded with major events: rate decisions from Britain, Europe and Australia, job figures from Canada, New Zealand and the US – the almighty Non-Farm Payrolls. Here’s an outlook for the major events of the week.

I’m trying a new format of the weekly outlook this week, somewhat similar to the specific currency coverages. Let me know what you think about it.

Apart from scheduled events, note the G7 meeting that start on Friday. Comments from there and towards this event might impact the markets.

  • American ISM Manufacturing PMI: Published on Monday at 15:00 GMT. This important indicator showed expansion in the past five months, reaching a high of 55.7 points last month. Purchasing managers are expected to show stability with the index stable at 55.7 points.
  • Australian rate decision: Published on Tuesday at 3:30 GMT. Australia’s high interest rate is expected to rise once again, this time to 4%. This is backed by an excellent job market and steadily rising prices. While this is expected, it will still boost the Aussie, as there were doubts about it.
  • American Pending Home Sales: This figure was a total disaster last month, falling by 16% (!). This came after strong rises and probably shows the impact of the effect of the government’s schemes, and also their pullout. A rise of 0.6% is predicted this time. A drop will hurt the dollar.
  • American ADP Non-Farm Employment Change: Published on Wednesday at 13:15 GMT. The “mini-NFP” doesn’t always foresee Friday’s Non-Farm Payrolls, but usually moves the markets. Economists were too optimistic in the past  8 months. Last month saw a loss of 84K jobs, and we’re expected to see the job loss slashed to 41K this time.
  • American ISM Non-Manufacturing PMI: Published on Wednesday at 15:00 GMT. Contrary to the manufacturing sector, the situation here is more fragile. The index was went around 50 in recent months, hardly rising above this important number to score 50.1 points. A rise to 51.3 points is predicted this time.
  • New Zealand Employment Data: Published on Wednesday at 21:45 GMT. Employment figures are important everywhere, and in New Zealand they are published only once a quarter – what makes them a huge market mover. Employment Change is expected to drop by 0.1%, less than last month’s 0.8%. The Unemployment Rate is predicted to rise from 6.5% to 6.8% – weak expectations for the kiwi.
  • British Rate Decision: Published on Thursday at 12:00 GMT. No rate hike is expected now – it will probably remain at 0.5%. This comes despite improving British employment and inflation. Mervyn King isn’t impressed. The focus will be on the BOE’s Asset Purchase Facility which is running out of money. If the bank expands it, the Pound will weaken. If they begin talking about a future rate hike in their accompanying statement, the Pound will rise.
  • European Rate Decision: Published on Thursday at 12:45. Also here, Jean-Claude Trichet isn’t expected to move the rate from 1%. There’s too much trouble in Europe. The market will probably shake, but no long-term effect will be seen, unless he makes some dramatic statement in the accompanying press conference.
  • American Unemployment Claims: Published on Thursday at 13:30. The last employment number before the NFP disappointed in recent weeks and made a retreat. It’s expected to improve from 470K to 461K. A drop below 430K is needed to be seen in order to turn the choppy trading around this publication into a bigger move.
  • Canadian job figures: Published on Friday at 12:00 GMT. 90 minutes before the American NFP, USD/CAD will get its first shocker. The Canadian job market has been OK last month, keeping most of the gains in the previous month. A rise of 15,300 jobs is expected in the Employment Change and the Unemployment Rate is expected to stay stable at 8.5%.
  • Non-Farm Payrolls: Published on Friday at 13:30 GMT. The king of forex is finally expected to be positive. In last month’s release for December, we’ve seen a fresh disappointing number of 85,000 lost jobs. On the other hand, November’s figure was revised to a minor but symbolic gain in jobs – 4,000. This time, the fresh number for January is predicted to show a rise of 20,000 jobs. This will be very good news. It’s important to note the revision for December and also the Unemployment Rate, which is predicted to remain at 10% for a third month in a row. This will move the markets for many hours and possibly many days.

That’s it for this very busy week. I’ll later publish specific currency coverages. In the meantime, here’s an interesting article I hosted a few days ago – about positioning data.

Further reading:

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