Forex Weekly Outlook February 10-14

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The USD and the JPY retreated in a week that saw a fresh “risk on” atmosphere, even though the Non-Farm Payrolls left a lot of confusion. Janet Yellen’s testimony before the US Senate, Mark Carney’s speech, Australian employment figures and US retail sales and consumer confidence are the highlights of this week. Here is an outlook on the main market movers to shape forex trading in the coming days.

The US economy gained 113,000 jobs in January compared to 75,000 in December falling short of the average monthly gain of 194,000 reached in 2013 and the 185,000 estimated for January. Meanwhile, the unemployment rate declined to 6.6% from 6.7% in December as more people looked for work and got hired. The unemployment rate reached its lowest rate since October 2008, but the drop is more related to upside revisions in numbers for early 2013 than recent trends. This disappointing headline number may prompt the Federal Reserve to reexamine its tapering plan, but it could wait to see if the current slowdown is weather related. In Europe, the confident message conveyed by Draghi gave a boost to the euro. While he had an explanation for current low inflation, the ECB is still open to new policy moves if data changes. Commodity currencies had a good week: the Aussie enjoyed a more hawkish statement by the RBA, and the kiwi and loonie both enjoyed better than expected employment numbers. The pound lagged behind as traders preferred focusing on the weaker British data. Let’s start:

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  1. Janet Yellen speaks: Tuesday, 15:00. New Fed chair Janet Yellen will testify before the U.S. senate. This will be her first public comments on monetary policy after taking the reins at the U.S. central bank. Her first appearance was at her Senate confirmation hearing on November 14, before the Fed announced the tapering of its bond-buying program. Yellen will have to face the continuation of the taper plan, raise rates and reduce the Fed’s balance sheet.
  2. Mark Carney speaks: Wednesday, 10:30. Bank of England Governor Mark Carney will speak about the Inflation Report, in London. Economists believe Mark Carney will raise the benchmark from 0.5% in light of the recent growth trend in the UK economy and domestic recovery. It is estimated that the BOE will be the first to raise rates, followed by the Fed. With lower UK unemployment, the pressure for faster action rises.
  3. Mario Draghi speaks: Wednesday, 10:30. ECB President Mario Draghi will speak in Brussels. He may talk about the ECB’s recent decision to maintain rates and monetary policy in light of the slow inflation. Market volatility is expected. The central bank did say incoming information in March is important.
  4. US Federal Budget Balance: Wednesday, 19:00. The U.S. government deficit continued to shrink in December posting a surplus of $53.2 billion following a deficit of 135.2 billion in Novwmber. The government hopes to achieve an operational balance by 2015 after the U.S. federal budget deficit surged above 9% of GDP reaching $1.4 trillion in 2009. The improvement in GDP growth since late 2009 and stronger consumer confidence strengthened economic activity, constantly increasing tax revenues. Meanwhile federal government expenditure was very low in the past two years, enabling deficit reduction. A deficit of $28.2 billion is expected this time.
  5. Australian Employment data: Thursday, 0:30. Australia’s unemployment remained at 5.8% in December while the Job force narrowed by 22,600 positions to 11,629,500. The main reduction occurred in full-time employment dropping 31,600 while part-time employment increased by 9,000. Nevertheless, economists forecast growth in the Australian job market during this year. The Australian economy is expected to add 15,300 jobs, while unemployment rate is predicted to rise to 5.9%.
  6. US Retail sales:  Thursday, 13:30. US retail sales increased in December amid a pick-up in sales for clothing and online acquisitions. However almost everywhere else, proved to be disappointing in the holiday shopping season. Retail sales increased by a mere 0.2%, following a 0.4% gain in November. Automobiles and trucks declined 1.8% due to the unusually cold weather and other retail spending showed general weakness. However, Core sales, excluding volatile categories such as autos, gas and building supplies, edged up 0.7% and may give a more reliable and positive estimate on the true state of the US economy. With the ongoing improvement in the job market, household spending is bound to strengthen more rapidly in 2014. US retail sales are projected to remain unchanged, while Core sales are expected to climb 0.2%.
  7. US Unemployment claims: Thursday, 13:30. The number of people filing initial claims for unemployment benefits dropped more than expected last week, down 20,000 to 331,000, indicating fewer layoffs and improved working conditions. The four-week average, ticked up 250 to 334,000, remaining in the pre-recession levels. However severe weather conditions may bring further volatility to the job market in the coming weeks. The number of new claims is expected to reach 331,000.
  8. US UoM Consumer Sentiment: Friday, 14:55. The preliminary estimate for consumer sentiment in January dropped to 80.4, following 82.5 in December. The final survey numbers were later revised to 81.2. The preliminary figure was lower than the 83.4 projected by analysts and was closely related to disappointing job growth in December. Consumer sentiment is expected to rise to 80.6.

*All times are GMT.

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

More: 3 ways to exit in the forex markets

Further reading:

Get the 5 most predictable currency pairs

About Author

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

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