Forex Weekly Outlook – January 24-28

US CB Consumer Confidence, US Rate Decision and US Unemployment Claims are the main activities this week. Here is an outlook on key events to watch for.

Analysts and investors look forward to earnings reports from major U.S. manufacturers over the next two weeks, in order to assess revenue growth. This is the best indicator of health for the industrial sector over the next year. Sales growth will be critical to profits and will disclose whether recovery is real.

1. Australian Inflation Data: Monday, 0:30. CPI rose 0.7% in the September quarter, for an annual rate of 2.8 percent. The figures were less than economists had predicted although removing some urgency for the Reserve Bank to lift rates. However, there is almost certainly to be another string of rate rises at some point over the next months. A further rise of 0.8% is expected now.
2. Japan‘s Rate Decision: Tuesday. The central bank left its credit programs unchanged and kept the  key interest rate  between zero and 0.1 percent. The rate decision was given by a unanimous vote. The BOJ left the size of its asset-buying fund at 5 trillion yen ($60 billion) and the credit program at 30 trillion yen. The bank will steadily purchase various financial assets and provide longer-term funds to efficiently affect the market. The rate is expected to remain 0.10%.
3. Canadian inflation Data: Tuesday, 12:00. Bank of Canada kept its overnight rate at 1%. The main concerns impelled it to keep the overnight rate at 1% were the weak exports and the sovereign debt crisis in Europe. The bank rate stays at 1.25% and the deposit rate at 0.75%. According to U.S. counterpart Scotiabank chief economist Warren Jestin the Bank of Canada is not expected to raise rates until the fourth quarter and there is even a chance the next move could even be downwards if the loonie strengthens too much. Inflation rate is forecasted to drop by -0.1%.
4. US CB Consumer Confidence: Tuesday, 14:00. Consumer confidence has gone down by 1.8 to 52.5 in the month of December despite the encouraging consumer spending data. Based on 5000 surveyed households this index is a leading indicator of consumer confidence. Nevertheless consumer confidence in December is no worse off than it was a year ago suggesting that the economic expansion will continue well into 2011. An improvement in Consumer Confidence is expected with 54.5 reading.
5. US New Home Sales: Wednesday, 15:00. New home sales, like existing home sales, show a promising improvement in November. New home sales rose 5.5 % to a 290,000 unit annual rate. Previously released data on pending home sales point to continuing strength for the housing sector.  The growth trend is expected to continue with 303,000 units forecast.
6. US Rate Decision: Wednesday, 19:15. At the last monetary policy meeting The Fed said it would continue buying long-term Treasury notes from banks to promote a stronger economic recovery and the Fed’s rate-setting Open Market Committee kept the key short-term interest rate near zero. The Fed’s   rate is expected to be maintained.
7. New Zealand Rate Decision: Wednesday, 20:00. New Zealand’s central bank has executed two rate increases of 25 basis points each in June and July 2010.  Since then, no further change in rates was made.   Interest rates are predicted to rise moderately  over the next two years, for now it seems prudent to keep the OCR low until the recovery becomes more robust and underlying inflationary pressures show more obvious signs of increasing.  The same rate of 3.0% is predicted.
8. US Core Durable Goods Orders: Thursday, 13:30. Core Durable Goods Orders excluding transport made a big jump by increasing 2.4% the largest increase since March, after a 1.9 percent drop in October. However, overall orders dropped by a larger than expected 1.3 percent last month, dragged down by a plunge in bookings for civilian aircraft and motor vehicles. Nevertheless it is still encouraging news for producers. An increase of 0.9% is expected now.
9. US Uemployment Claims: Thursday, 13:30. The number new claims for unemployment benefits fell by 37,000 to 404,000. The decrease was more than the expected forecast of 420,000. Following the signs of growth in the US economy at the end of last year, companies started hiring more workers and improving the labor market. A small rise to 409,000 is anricipated.
10. American Pending Home Sales: Thursday, 15:00. The number of contracts to buy existing homes rose 3.5% in November 1.8% more than forecasted signaling improvement in sales following a post-tax credit plunge. Housing demand should continue its recovery entering as housing oversupply should keep pushing housing prices down. A rise of 1.1% is expected this time.
11. US Advance GDP: Friday, 13:30. The third quarter Advance GDP increased by 2.0% and revised up to 2.6% in the second estimate following 1.7% increase in the second quarter due to rising personal consumption expenditures (PCE), private inventory investment, nonresidential fixed investment, federal government spending, and exports. GDP is expected to continue its growth by 3.5%.

* All times are GMT.

Further reading:

• For EUR/USD, check out  the  Euro/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 forecast.
• For the New Zealand dollar (kiwi), read the  NZD forecast.
• For USD/CAD (loonie), check out the  Canadian dollar forecast.

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