Forex Weekly Outlook January 14-18

Big moves were seen in markets: the euro surged while the dollar and yen plunged. Will this high volatility continue?  Ben Bernanke’s speech, US retail sales, inflation data, consumer sentiment and manufacturing data are the major events this week. Here is an outlook on the market-movers ahead.

ECB President Mario Draghi surprised the markets by saying the decision to hold was unanimous and by cheering the improvement in the financial markets. While he clearly stated that the real economy is still sluggish, the markets saw the glass half full and the euro leaped. The Japanese government continued to weigh on the yen by approving an ambitious stimulus plan.  Initial jobless claims increase during the first week 2013, to 371,000 , up 4,000 from the previous week. During the last year, US economy continued to recover resulting in lower numbers of new claims to an average of 350,000 to 400,000 range.

1. Ben Bernanke speaks: Monday, 21:00. Federal Reserve Chairman Ben Bernanke is scheduled to speak at the University of Michigan about monetary policy, recovery from the global financial crisis, and long-term challenges facing the US economy. Audience questions are expected. This event can cause volatility in the markets. It will be interesting to hear if he says something about monetary tightening, following the FOMC minutes.
2.  UK inflation data: Tuesday, 9:30. Consumer Prices were unchanged in November from October reaching 2.7%. The reading was higher than the 2.6% anticipated by analysts. increased utility bills as well as higher bread and cereal prices contributed to inflation, while energy prices had an offsetting downward impact on inflation. The same reading of 2.7% is expected now.  The BOE left policy unchanged.
3. US retail sales: Tuesday, 13:30. U.S.  retail  sales increased 0.3% in November amid steady job creation and elevated consumer spending in the fourth quarter. Meantime Core sales excluding automobiles remained flat in November, in line with expectations.   It seems superstorm Sandy had both positive and negative effects on November’s sales data. Motor vehicle sales increased 1.4%, sales at  electronics  stores climbed 2.5%, while mail-order and Internet sales jumped 3 percent.  Both retail and Core retail sales are expected to climb 0.2%.
4. US PPI: Tuesday, 13:30. US Producer Price Index dropped more than expected in November, down 0.8%, amid lower energy costs, following a 0.2% decline in October. Core PPI excluding both food and energy, rebounded by a 0.1% rise, after a drop of 0.2% in October. A small decline of 0.1% is forecasted.
5. Australian employment data: Thursday, 0:30. Australian jobless rate dropped unexpectedly in November registering 5.2% from 5.4% in October in light of increased hiring in the mining-industry. Economists estimated a reading of 5.5%. Meantime, Australian economy added an unexpected addition of 13,900 jobs contrary to a modest rise of 0.2% forecasted by analysts, confirming the healthy state of the economy. An addition of 4,600 jobs is expected with unemployment claims reaching 5.4%.
6. US Building Permits: Thursday, 13:30. U.S.  building industry continued to improve in November with a 4-1/2 year high of 899,000 units, following 870,000 in the previous month. The reading topped predictions of an 875,000-unit pace, indicating the housing industry was one of the major forces on US economic growth during 2012. A rise to 910,000 units is expected now.
7. US Unemployment Claims: Thursday, 13:30. Weekly applications for U.S. unemployment benefits edged up last week to 371,000 from 367,000 in the previous week, all in all reflecting stability in the job market.   The four-week average, increased 6,750 to 365,750, after falling to a four-year low the previous week.  This reading   did not include estimates, unlike the previous reports done in the holiday season.  A small drop to 369,000 is forecasted.
8. US Philly Fed Manufacturing Index: Thursday, 15:00. Factory activity in the U.S. mid-Atlantic region rebounded in December, rising to 8.1 after a 10.7 fall in November amid picked up in new orders. Economists anticipated a negative reading of minus 2.2. This positive figure may be a good sign for a healthy economic recovery in 2013. A drop to 7.1is expected this time.
9. US UoM Consumer Sentiment: Friday, 14:55. U.S. consumer sentiment declined further in December, with a lower than expected reading of 74.5 compared to 82.7 in November declines indicating a downward trend in consumer sentiment. Nevertheless, the fiscal cliff  uncertainty before the end of 2012 contributed to the loss of optimism in the surveys. A rise to 75.1 is forecasted.

*All times are GMT.

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

You may also be interested in:  EUR/USD Rebounds Off Key Support Confluence

Further reading:

• For EUR/USD, check out the  Euro to Dollar forecast.
• For the Japanese yen, read the  USD/JPY forecast.
• For GBP/USD  (cable), look into the  British Pound forecast.
• For the Australian dollar (Aussie), check out the  AUD to USD forecast.
• For USD/CAD (loonie), check out the  Canadian dollar