Forex Weekly Outlook Jan 30-Feb 3

The US dollar was mixed in Trump’s first week in office. Rate decisions in Japan, the US and the UK, GDP data in Canada and the buildup to the US Non-Farm Payrolls on Friday promise a busy week. These are the main events on forex calendar. Here is an outlook on the market-movers for this week.

US data was weaker than expected with the first GDP estimate for the final quarter of 2017, falling short of expectations with a 1.9% growth instead of the 2.1% rise initially anticipated. A decline in exports was the main reason behind the disappointing release. The newly elected US president Donald Trump  stormed into office with lots of executive orders. So far, it seems that trade issues such as tariffs on Mexico and the retreat from TPP take priority over infrastructure spending. The initial reaction was a slide in the dollar, but the greenback recovered later on. Let’s start:

1. Japan rate decision: Tuesday. The  Bank of Japan maintained its monetary policy in its December meeting amid modest pace of growth. The decision was in line with market forecast. The Bank also said it would continue to increase ETF purchases at an annual rate of ¥6 trillion. Consumer prices rose mildly in October for the first time in nine months, and core inflation stared another decline. Furthermore, exports declined slightly annually, indicating stronger economic activity across the globe.
2. Canadian GDP data: Tuesday, 13:30. Canada’s gross domestic product  contracted unexpectedly in October  by 0.3% amid a slowdown in production. Economists expected a small rise of 0.1%. Manufacturing fell 2%, the biggest decline since December 2013 indicating growth is sluggish. Durable and non-durable goods dropped 2.1% and 2% respectively. Poloz had hoped non-energy exports, including manufactured goods, would lead a recovery after the commodity crash of 2014. Services expanded 0.1% in October. Retail and wholesale trade increased 0.7% and 0.6% respectively. The Canadian economy is expected to grow by 0.3% in November.
3. US CB Consumer Confidence: Tuesday, 15:00. Consumer moral jumped in December to the highest level since August 2001 as Americans were more confident about the outlook. Confidence rose to113.7 following a revised 109.4 in November. The reading was better than anticipated as the measure of consumer expectations for the next six months edged up to 105.5, the highest since December 2003, from 94.4. Present conditions index declined to 126.1 from 132. Americans have high hopes for Trump administration to lead the US economy to fresh highs. A score of 112.6 is on the cards now.
4. US ADP Non-Farm Employment Change: Wednesday, 13:15. U.S. private sector added 153,000 jobs in December, below market forecast. Economists expected the ADP National Employment Report would show a gain of 171,000 jobs. Private payroll gains in the month before showed a downwardly revised addition of 215,000 jobs from an initially reported 216,000 increase. A gain of 165K private sector jobs is expected for January.
5. US ISM Manufacturing PMI: Wednesday, 15:00. The ISM manufacturing index edged up 1.5 points in December, hitting the best score in two years. Analysts expected the index to reach 53.7. New orders climbed to 60.2 up 7.2 points which is the sharpest jump of the entire cycle. Production increased 4.3 points to 60.3, employment edged up eight-tenths to 53.1, and export orders reached 56.0 which is a 2-1/2 year high. This was a strong start to 2017. A score of 55 points is likely for January.
6. US Crude Oil Inventories: Wednesday, 15:30. U.S. crude oil inventories increased by  2.93 million barrels  in the January 20 week to 488.3 million, rising by 5.3 percent from the same period last year. Inventories of motor gasoline rose 6.8 million barrels to 253.2, while distillates rose marginally by 0.1 million barrels to 169.1 million. Imports averaged 7.8 million bpd in the week, down 568,000 barrels per day from the prior week. Total products supplied over the last four weeks averaged 19.0 million barrels per day, down 300,000 per day from the previous week’s 4-week average and down 2.6% from the same time last year.
7. US FOMC Rate Statement: Wednesday, 19:00. The Federal Reserve decided to raise its benchmark interest rate in December as widely anticipated. Federal funds rate was increased by 25 basis points, to a range of 0.50 to 0.75%. This was the second rate hike in a decade. The Fed plans to gradually lift the monetary policy support and enable the economy room to advance without it. President-elect Donald Trump pledged to cut taxes for corporations and individuals and to invest about $550 billion in infrastructure. Economists expect these steps will spur economic growth and inflation while supporting company earnings.
8. UK rate decision: Thursday, 12:00. The  Bank of England  kept interest rates unchanged at 0.25% but warned that higher inflation and slower wage growth will weigh in household budgets in 2017. The MPC reiterated its previous stance that it was ready to make monetary policy tighter or looser depending on how the economy evolves as the Brexit process gets under way. Growth is expected to slow and higher inflation will not be translated into wages and inflation expectations. The central bank is expected to hold rates throughout 2017. In addition to the rate statement and the accompanying meeting minutes, the BOE also publishes its quarterly inflation report.
9. US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits increased more than expected the week ended Jan. 21. The number of claims edged 22,000 up to a seasonally adjusted 259,000. However, despite the big rise, the number of claims remains low. The four-week moving average of claims fell 2,000 to 245,500 last week, the lowest since November 1973. Economists expected claims to reach 247,000. A level of 251K is predicted now.
10. US Non-Farm Payrolls report: Friday, 13:30. Nonfarm payrolls grew less than expected in December, adding 156,000 jobs. However, the smaller than forecasted increase was overshadowed by a sharp gain in wages. The unemployment rate edged higher to 4.7%. Economists expected payrolls growth of 175,000 and unemployment rate of 4.7%. The positive news in this report was the sharp gain in wages. Average hourly earnings jumped 10 cents to $26, representing a 2.9% annualized gain, this rise case after a mild decline in November.  Growth in average hourly earnings is real evidence that the labor market has recovered. In January, 170K are estimated. Wages are  projected to rise by 0.3%. The unemployment rate is  forecast to remain at 4.7%.
11. US ISM Non-Manufacturing PMI: Friday, 15:00. Service-sector activity registered a solid  gain in 2016.  The Institute of Supply Management reported its non-manufacturing index  remained unchanged at 57.2 from November, beating forecasts for 56.8. It was the highest reading for the index since October 2015. The elevated score derived from the employment index, rising 5.1 percentage points month-over-month to 58.2%. A score of 57 points is on the cards.

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

*All times are GMT.

Our latest podcast is titled  Trumping Trade and the Donald Dollar

Follow us on Sticher or iTunes

Safe trading!