Forex Weekly Outlook February 13-17 2017

The US dollar made an attempt for a comeback. GDP data from Japan and Germany, Inflation data from the UK and the US, Janet Yellen’s testimony before the US Senate, US retail sales, Crude Oil Inventories, Building Permits, Philly Fed Manufacturing Index and Employment figures from the US, The UK and Australia. These are the main events on Forex calendar. Here is an outlook on the market movers for this week.

The US dollar recovered as Trump had a calmer week. This provided the ground for a much-needed correction. The euro was specifically hit by various political worries while the kiwi dropped on the relative dovishness of the RBNZ. In the UK, the Brexit Bill completed its passage through the House of Commons, but this was already priced in. US data was mixed, with strong jobless claims but a drop in consumer confidence. Let’s start:

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Japan GDP data: Sun 23:50. Japan’s economy expanded 0.5% in the third quarter of 2016 after three quarters of growth, mainly due to a rise in exports. The reading was better than the 0.2% growth rate predicted. Employment and wages increased at a moderate pace indicating economic recovery is maintained. The economy expanded by an annualized rate of 2.2% in the third quarter beating market forecast. However downside risks from the new trade policies in China and the US increase concerns among policymakers. Economists expect a 0.3% growth rate in the final quarter of 2016.
German GDP data: Tuesday, 7:00. Germany’s economic growth softened in the third quarter of 2016 due to weaker exports. Europe’s strongest economy expanded a modest 0.2% between July and September compared to 0.4% growth in the prior quarter. Economists expected a higher reading of 0.3%. Some analysts believe Britain’s vote to leave the European Union had a negative effect on domestic activity. Another threat to the economy came from the newly elected US President Donald Trump and his trade policy campaign to limit foreign imports. This could inflict a major blow to Germany’s economic growth. Analysts expect a growth rate of 0.5% in the fourth quarter of 2016.
UK Inflation data: Tuesday, 09:30. UK inflation edged up in December to 1.6%, the highest rate since July 2014. The reading exceeded analysts’ forecast of 1.4% and followed a 1.2% gain in November. Higher air fares and food prices fueled up this rise. However, the annual rate remains below the Bank of England’s. The sterling fell sharply against many currencies following the Brexit vote making manufacturers pay 16% more on raw materials. Mark Carney said consumer spending could be hit by rising prices from the weaker pound. CPI is expected to rise 1.9% in January.
US PPI: Tuesday, 13:30. U.S. producer prices increased by a seasonally adjusted 0.3% in December. The reading was higher than the 0.1% rise expected by analysts and followed a 0.4% increase in the previous month. Core producer prices gained 0.2%. The headline PPI index climbed 1.6% in 2016 after a 1.1% decline in 2015. Producer prices are estimated to gain 0.3% in January.
Janet Yellen speaks: Tuesday, 15:00. The chair of the Federal Reserve Janet Yellen will testify on the Semiannual Monetary Policy Report before the Senate Banking Committee, in Washington DC. Yellen may talk about the Fed plans to put future US interest rate increases on hold following the fall in global stock markets since the start of the year. Growth may be effected by the uncertainty around China’s trade policy despite the fact that the US economy is in many ways close to normal with a steady job creation and faster wage growth.
UK Employment data: Wednesday, 9:30. The number of people claiming jobless benefits declined by 10,100 to 797,800 in December contrary to 4,600 gain estimated by analysts. UK employment market remained resilient with rising employment and steady wage growth. However the question is whether salary increase will catch up with inflation. Economists claim the government needs to increase investment after the Brexit to prevent a decline in living standards. UK jobless claims are expected to increase 1,100 in January.
US Inflation data: Wednesday, 13:30. U.S. consumer prices gained 0.3% in December as households spent more on gasoline and rental accommodation, suggesting inflation pressures begin to mount. This was the biggest increase in two years, in accord with market forecast. Meanwhile, Core CPI, excluding food and energy costs, rose 0.2% as in November. As a result, the core CPI was up 2.2% in the 12 months through December, from 2.1 percent in November. Economists expect a 0.3% gain in consumer prices and a 0.2% rise for core CPI.
US Retail sales: Tuesday, 13:30. U.S. retail sales soared in December amid strong demand for automobiles and furniture, reaffirming the strength of the US economy in the fourth quarter as well as suggesting a positive momentum for 2017. The numbers are consistent with the Fed’s plans to raise rates two or three times this year. Retail sales gained 0.6% in December after rising 0.2% in the prior month. Sales rose 3.3% for all of 2016, up from 2.3% in 2015. Excluding automobiles rose 0.2% after the same gain in November. Rising wages due to a tightening labor market also are expected to boost consumer spending this year. Average hourly earnings rose 2.9% in the 12 months through December, the largest gain since June 2009. President-elect Donald Trump’s plans to cut taxes, boost infrastructure spending and relax regulations also is likely to lift economic growth. Retail sales are expected to rise by 0.1% and core sales are estimated a 0.4% gain in January.
US Crude Oil Inventories: Wednesday, 15:30. U.S. crude stocks soared in the week to Feb. 3, due to a big rise in imports. Crude inventories increased by 13.8 million barrels contrary to expectations for an increase of 2.5 million barrels.Crude imports jumped by 10.9 million barrels, the largest weekly rise on record, to 267.6 million barrels. Despite the unexpected rise, crude prices increased.
Australian employment data: Thursday, 0:30. The Australian employment market created 13,500 new jobs in December exceeding market forecast. However, the unemployment rate inched up to 5.8% from 5.7% as more people looked for jobs expanding the participation rate to 64.7%. The majority of jobs were full time positions, with 9,500 new jobs. Part time positions registered a 4,500 gain. However, economists claim the main impact came from biotech giant CSL recruiting 10% in December.
US Building Permits: Thursday, 13:30. The number if building permits declined 0.2% in December, reaching an annual rate of 1.21 million. Economists expected a larger gain of 1.22 million units. Housing starts edged up 11.3% at a seasonally adjusted annual rate of 1.226 million. On an annual base, housing starts gained 1.17 million units, the strongest since 2007 amid rising demand.
US Philly Fed Manufacturing Index: Thursday, 13:30. Business activity in the Philadelphia area picked up in January to its strongest level in over two years amid a rise in new orders and employment as well as an improved six-month outlook. Current condition edged up to 23.6 in January, the highest since November 2014. The sharp increase is also attributed Donald Trump’s U.S. presidential win as business owners look forward to tax cuts, infrastructure spending and looser regulations to promote faster economic growth.
US Unemployment Claims: Thursday, 13:30. The number of Americans filing new claims for unemployment benefits fell sharply in the week ended Feb. 4 to near a 43-year low of 234,000. The 12,000 decline was contrary to analysts’ prediction and continued the streak of low jobless claims, indicating a solid labor market. The labor market is at or close to full employment, with the unemployment rate at 4.8% after a nine-year low of 4.6% posted in November. Further tightening in labor market will boost wage growth. The four-week moving average of claims fell 3,750 to 244,250, the lowest level since November 1973.

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 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 Anat's Google Profile

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