Forex Weekly Outlook – December 14-18 2009

The upcoming week in forex trading has the FOMC meeting in the limelight. In addition, British employment figures, Australian GDP and inflation data from all over the world will dominate the scene, in the last full trading week of the year. Here’s a review of the major events in the upcoming week.

American Non-Farm Payrolls, that made a big surprise on December 4th, continue to overshadow the markets, as the dollar continues to strengthen. But this strength isn’t equal against all currencies. Let’s see what’s on the menu:

Monday, December 14th: Japanese Tankan Manufacturing Index provides a strong start for the week. It’s expected to rise but stay negative.

British Rightmove HPI will continue in the early hours. The British housing sector is getting better, and support a fragile hope to get out of recession.  Swiss PPI is predicted to turn positive, but still far from inflation.

European Industrial Production is predicted to drop this time, while the Employment Change, a late figure, is predicted to remain unchanged.

Tuesday, December 15th: Australian Monetary Policy Meeting Minutes will supply hints about the next RBA meeting – it looks like another rate hike is underway, especially with the improving job market in Australia.

Swiss Industrial Production is expected to rise again, but in a modest pace. German ZEW Economic Sentiment is very important for the Euro. It’s expected to drop this time.

British prices are expected to rise, with CPI at 1.8% (annualized). This should help the Pound. Also the RPI, which measures retail prices, is expected to rise after dropping for a long time.

American PPI is predicted to rise by 0.8% – a higher rise might help bring a rate hike. TIC Long-Term Purchases, which represent cash flow, are expected to rise significantly and help the dollar.

Also in the US: Empire State Manufacturing Index, Capacity Utilization Rate and Industrial Production are released, with expected improvements on all fronts.

Wednesday, December 16th: Australian GDP is expected to show a quarterly rise of 0.4%, less than last month’s 0.6%. This will be the third straight quarter of growth. Australia was never in recession.

In Britain, important employment figures are due: the Claimant Count Change – the earliest of employment numbers, is expected to rise once again to 14.2, after last month’s surprise. The Unemployment Rate, a delayed figure, is expected to rise from 7.8% to 8%. These releases will shake the Pound.

In Europe, initial PMI reports will be released: first in France, then in Germany and finally for the whole continent. Most numbers are expected to advance.

European CPI is expected to remain unchanged at 0.6%, and so is Core CPI at 1.2%. Stronger figures are necessary to push EUR/USD higher, after being hit by many figures.

On the other side of the Atlantic, American CPI is rpedicted to rise by 0.4%, while Core CPI is predicted to remain stable at 0.2%.

Two housing figures are published as well: Building Permits and Housing Starts, which are both predicted to get close to 600K. Also note the Current Account, which is predicted to show a bigger deficit.

The more important event comes in the evening: The  Federal Reserve is expected to leave the interest rate unchanged once again, despite the excellent Non-Farm Payrolls. Bernanke downplayed this option. While the Federal Funds Rate won’t move from 0.25%, the FOMC Statement will be of interest to traders, as future plans about the rate are expected to be heard.

Thursday, December 17th: Kiwi traders will be interested in the NBNZ Business Confidence which will be published early in the day.

British Retail Sales are predicted to rise again, this time by 0.5%. CBI Realized Sales are also expected to advance.

Canadian CPI will probably turn positive and rise. Core CPI is expected to stay stable at 0.1%.

American Unemployment Claims retreated last week, and are predicted to edge up this time. Also note the Philly Fed Manufacturing Index which is expected to drop.

Friday, December 18th: The rate decision in Japan isn’t expected to bring a change in the Overnight Call Rate, but the accompanying Monetary Policy Statement may lay out the policy for intervention, after the emergency BOJ meeting that was held about two weeks ago.

German Ifo Business Climate is another important survey for the continent, and it’s expected to edge up once again.

British Public Sector Net Borrowing is expected to double to 23.1 billion. This comes on the background of Alistair Darling’s problematic budget.

That’s it for the major events for this week. I’ll later post specific currency coverages. Stay tuned!

Further reading:

• For a broad view of all the week’s major event in all currencies, read the  forex weekly outlook.
• For the Euro, read the  EUR USD Forecast.
• For GBP/USD, look into the  British Pound forecast.
• For the Australian dollar, read the  AUD/USD forecast.
• For USD/CAD, check out the  Canadian dollar forecast.

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