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Majors, US Dollar Forecast

Forex Weekly Outlook January 21-25

The US dollar regained lost ground against quite a few currencies in a busy week, especially for the yen. Rate decisions in Japan and Canada. US housing and employment data are the major events this week. Here is an outlook on the main market movers ahead.

US economic indicators have generally been good: number of unemployment claims declined sharply to 335K,  its lowest level since January 2008. Meanwhile the housing sector continued its strong rise with housing starts reaching 0.95 million, outweighing predictions. However, the Philly Fed Index plunged unexpectedly to minus 5.8 from plus 8.1, Will the US economy continue to improve in 2013? Regarding the euro, it  struggles to approach 1.3500  as worries about the German economy persist.

  1. Japanese rate decision: Tuesday. The Bank of decided on a third dose of monetary stimulus in four months expanded its asset-buying and lending program by 10 trillion yen to 101 trillion yen and maintained its interest rate at a minimum low. The BOJ also promised a more aggressive action in 2013. These measures are pushed by Japan’s new Prime Minister Shinzo Abe who believes stronger action will help beat deflation and is keeping the pressure up while he’s in power. He also announced setting a joint inflation target with the BOJ. More QE is expected, and in an addition, there is chatter about a negative deposit rate and other measures. The BOJ is under huge pressure to act.  
  2.  German ZEW Economic Sentiment: Tuesday, 10:00. The ZEW Indicator of Economic Sentiment for Germany surged 22.6 points in December to 6.9 points rebounding from 6 months in negative territory. The rise indicates economists’ belief that the Eurozone economic activity will stabilize by summer 2013. A further rise to 12.2 is expected now.
  3. US Existing Home Sales: Tuesday, 15:00. Excellent conditions in the US housing market led to another increase in existing home sales during November with a 5.9% surge reaching a 5.04 million annual rate, following 4.76 million in the prior month. In light of the growing demand, scarcity of supply is definitely an issue in the housing market, causing an increase in prices.  Another increase to 5.11 million is forecasted.
  4. UK employment data: Wednesday, 9:30. The number of UK citizens claiming unemployment benefits dropped unexpectedly in November by 3,000 following a 6,000 increase in October while analysts expected a rise of 7,000 claims. The number of people with jobs hit a record high, which is likely to boost the UK dormant economy. A rise of 800 claims is expected this time.
  5. Canadian rate decision: Wednesday, 15:00. The Bank of Canada decided to maintain its interest rate at 1.0%, claiming that the Canadian economy is doing better than expected but weak performance of foreign markets are expected to lower GDP growth. No hints were given on the possibility of a future rate hike or cut.
  6. US Unemployment Claims: Thursday, 13:30. Initial claims for U.S. unemployment benefits dropped sharply by 37,000 to 335,000 last week, reaching their lowest level in five years. The reading missed forecasts for 369,000 new claims. However the exceptionally low figure could be due to seasonal adjustments, but the overall picture points on an ongoing recovery trend. An increase to 361,000 is expected now.
  7. German Ifo Business Climate: Friday, 9:00. German business confidence increased for a second month in December, reaching 102.4 following 101.4 in November. The reading was stronger than the 101.9 expected by analysts, indicating German economy is expected to strengthen in 2013 and contribute to the Eurozone recovery. Another increase to 103.1 is forecasted.
  8. UK GDP: Friday, 9:30. UK economic growth rebounded in the third quarter at the fastest pace in five years, rising 1.0%, well above predictions of a 0.6% increase. Olympic ticket sales may have helped this expansion, but other factors remain weak. A 0.2% contraction is expected now, pointing to a triple dip recession after reaching a triple top.
  9. Canadian inflation data: Friday, 13:30. Consumer prices remained soft in November with the headline CPI falling 0.2% on the month, while Core CPI excluding food and energy prices remained unchanged, reflecting the weakness of the overall index. Economists expected Core CPI to rise 0.2%. Both CPI and Core CPI are expected to decline by 0.2%.
  10. US New Home Sales: Friday, 15:00. Americans bought 4.4% more new homes in November, the fastest pace in more than two and a half years, reaching a seasonally adjusted annual rate of 377,000, This rise provides further evidence to the healthy state of the US housing market. Another increase to 383,000 is expected now.

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

*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