The resurgence of Covid-19 continues to hammer economic growth across the major economies. The eurozone is struggling, while in the US, a dovish Fed and plans for massive stimulus could spell a bumpy road for the US dollar. This week’s key releases are eurozone GDP and US employment.
German GDP in Q4 slowed to just 0.1%, down from 8.2%. France’s GDP for Q4 came in at -1.3%, its fourth decline in five quarters. There was good news on the inflation front, as CPI jumped to 0.8% for January, up from 0.5% and an 11-month high.
Strong UK employment numbers gave sterling a slight boost early last week. Wage growth jumped to 3.6%, up sharply from 2.7%. Unemployment rolls rose by just 7 thousand, well below the estimate of 47.5 thousand. The unemployment rate nudged up from 4,.9% to 5.0%, its highest level since March 2016.
Canada’s GDP in November was unexpectedly strong with a gain of 0.7%, up from 0.4%. This reading easily beat the forecast of 0.4%.
The Federal Reserve policy meeting reiterated a dovish stance and Fed Chair Powell poured cold water on speculation that the Fed would taper its QE program in the near future. Advance GDP for Q1 posted a respectable gain of 4.0%, close to the estimate of 4.2%.
- US ISM Manufacturing PMI: Monday, 7:00. Manufacturing continues to post readings well into expansionary territory and the estimate for January stands at 60.0.
- French CPI: Tuesday, 7:45. Inflation in the eurozone’s second-largest economy posted a second-straight gain of 0.2% in December. However, the forecast for January stands at -0.3%.
- Eurozone GDP: Tuesday, 10:00. The markets are preparing for a rough end to the year for eurozone growth. The first estimate for Q4 GDP stands at -1.4%, as the resurgence of Covid-19 is hampering the economy.
- Eurozone Inflation Report: Wednesday, 10:00. Inflation remains weak in the eurozone, but better news is expected for January, The headline reading is expected to improve to 0.4%, while the core reading is expected to climb to 0.7%, which would mark a 6-month high.
- US ISM Services PMI: Wednesday, 15:00. The services sector is not showing any ill effects from Covid, as recent posts have been well above the 50-level, which indicates expansion. The forecast for January is 56.7.
- BoE Rate Decision: Thursday, 12:00. The Bank of England is expected to stand pat and maintain interest rates at 0.10%. Investors will be interested in the MPC quarterly report, which will provide a close look at the health of the UK economy.
- Canada Employment Report: Friday, 13:30. Canada’s economy shed 62.6 thousand in November, its first decline since April. The unemployment rate nudged higher to 8.6% up from 8.5%. We now await the December numbers.
- US Employment Report: Friday, 13:30. Wage growth is expected to slow from 0.8% to 0.3% in January. The economy shed 140 thousand jobs in December but is expected to nudge into positive territory, with an estimate of 55 thousand. No change is expected in the unemployment rate of 6.7%.
Further reading:
- EUR/USD forecast – for everything related to the euro.
- USD/JPY forecast – projections for dollar/yen
- AUD/USD forecast – predictions for the Aussie dollar.
- USD/CAD forecast – Canadian dollar analysis
- Forex weekly forecast – Outlook for the major events of the week.
Safe trading!
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