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Majors, US Dollar Forecast

Forex Weekly Outlook – February 14-18

US Inflation data, TIC Long-Term Purchases, UK employment data, American FOMC Meeting Minutes and Unemployment Claims are the highlight of this week. Here is an outlook on the coming events.

Increases in prices for specific goods does not reflect on overall inflation which is currently below the central bank’s desired level said  Dennis Lockhart, president of the Federal Reserve Bank of Atlanta. Low inflation rates was the reason for the Fed’s second round of bond buying in November. Lockhart said the $600 billion program is already working.

  1. German ZEW Economic Sentiment: Tuesday, 10:00. German economic sentiment climbed more than expected in January reaching 15.4 points from 4.3 points in December. Economists had forecast an increase to 7 points.   And the Eurozone index increased to 25.4 points in January from 15.5 points in December.  ZEW President Wolfgang Franz said, “The currently low level of real interest rates should strengthen demand for capital equipment in Germany. Increased job security stimulates private consumption”.  A climb to 20.2 is expected now.
  2. US Core Retail Sales: Tuesday, 13:30. Retail Sales  continued to grow in December increasing by 0.6%, from a month earlier rising for the six consecutive months. Core sales, which remove the volatile autos and gasoline components also rose but by a lesser 0.4%. Core retail sales, is expected to gain 0.6% while Retail sales is predicted to increase 0.5%.
  3. US TIC Long-Term Purchases: Tuesday, 14:00. U.S. Treasury International Capital purchases rose above expectations in November soaring to USD 85.1 billion after falling to USD 28.9 billion in October while analysts had expected purchases of long-term securities to reach USD 46.7 billion. This data reflects the balance of internal and external investments. Further growth to USD 91.3 billion is predicted.
  4. British Employment Data: Wednesday, 9:30. The number of people claiming unemployment benefits in the U.K. fell more-than-expected by a seasonally adjusted 4,100 in December, after falling by 3,200 in November. Analysts had expected the claimant count to fall by 1,400. The rate of unemployment was maintained at 7.9% in line with expectations.  Another decrease of 3,300 is expected now.
  5. British Inflation Report: Wednesday, 10:30. The recent  UK  infla ­tion data came in at  CPI  3.7% for December 2010 with real infla ­tion at just above 6%. This is well above the BOE claim that high infla ­tion of above 3% was always just tem ­po ­rary and that it would resolve in a sub 2% rate by the end of the year (2010). The BOE’s recent Infla ­tion Report in Novem ­ber 2010 forecasted  UK  CPI  Infla ­tion to tar ­get an early 2011 peak of 3.5% before infla ­tion falls to below 2%  CPI  by the end of 2011 to tar ­get a rate of approx 1.7%, and for infla ­tion to remain well below 2% into the end of 2012, Meanwhile high infla ­tion con ­tinues to rise dur ­ing  2011.
  6. US Building Permits: Wednesday, 13:30. Building permits for new construction, or additions, surged to 635,000 in December well above the forecasted reading of 555,000 following 530,000 in November. Analysts are optimistic regarding the housing market forecasting growth in the new single-family home sales. A smaller gain of 570,000 is predicted now.
  7. US PPI : Wednesday, 13:30. Producer price inflation rose more-than-expected by 1.1% in December after rising by 0.8% in November while analysts had expected PPI to increase by 0.7%. Core PPI, which excludes food and energy costs, rose in line with expectations, rising by 0.2% in December, after increasing by 0.3% in November. A climb of 0.9% is forecasted now.
  8. American FOMC Meeting Minutes: Wednesday, 19:00. The previous FOMC meeting minutes released on January focuses on the gradual growth in employment, the concern about the housing market and the risk of deflation due to low inflation rates.
  9. Japan‘s Inflation Report: Tuesday. Japan’s central bank kept it key interest rate unchanged at virtually zero in to protect the fragile economy. According to expectation BOJ’s nine-member policy board voted unanimously at a two-day meeting to keep the overnight call rate target at 0 to 0.1 percent. Although Japan’s economy has been pressured by slowing overseas demand, a persistently strong yen and deflation the central bank predicts, however, that the economy will gradually find its footing again and return to a “moderate recovery path” in correlation with the growing global economy.
  10. US Core CPI: Thursday, 13:30. CPI in December jumped 0.5 percent, following a modest 0.1 percent rise the month before. Analysts had projected a 0.4 percent boost. Excluding food and energy, CPI inflation came in at 0.1 percent, equaling the rise for November and matching expectations.  CPI is in a growing trend due to higher oil prices while the Core CPI is soft due to weak housing and heavy competition among retailers. In coming months, the Fed likely is going to have to address this issue of two track inflation between headline and core numbers.Core CPI is expected to increase by 0.2%.
  11. US Unemployment Claims: Thursday, 13:30. The number of Americans filing new applications for regular state unemployment-insurance benefits fell 36,000 to a seasonally adjusted 383,000 reaching the lowest level since July of 2008. Analysts expected an initial-claims level of 411,000. The job market is showing a real recovery. The number of new claims is expected a slight climb to 401,000.
  12. US Philly Fed Manufacturing Index: Thursday, 15:00. Manufacturing activity in Philadelphia fell unexpectedly in January to 19.3 after rising to 20.8 in December revised down from 24.3. Analysts had expected the index to rise to 21.0.  The report said that all of the survey’s broad indicators remained positive this month and there was an apparent pickup in new orders and employment.  In addition, the survey’s broad indicators of future activity suggest that firms expect a continued expansion in activity over the next six months. Manufacturing activity is predicted to grow further to 20.8.
  13. Ben Bernanke speaks: Friday 13:00. Federal Reserve Chairman Ben Bernanke is due to participate in a panel discussion titled “Global Imbalances and Financial Stability” at the Global Imbalances and Financial Stability Launch Event, in Paris. He will probably talk about stimulus programs to help recovery. His words have great influence on the market.

*All times are GMT.

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Anat Dror

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