Forex Weekly Forecast January 16-20 2017

The dollar was under pressure in a turbulent week that saw President-Elect Trump’s press conference. He will enter the White House in the upcoming week. In addition, we have speeches from Mark Carney and Janet Yellen, Inflation data in the UK and the US, Employment data in the UK and Australia and rate decisions in Canada and the euro-zone. Here is an outlook on the major events this week.

Trump’s first press conference since his election victory lacked mention of fiscal stimulus, a cause of worry for markets and unwinded some of the dollar rally.  US Consumer Sentiment remained high at 98.1 in January, broadly in line with market forecast. The post-election surge in optimism also showed some concerns about the incoming administration. Retail sales edged up 0.6% boosted by auto demand and Producer prices climbed 0.3% after a 0.4% increase in the prior month. The higher input prices suggest inflation will rise in the coming months. All in all, recent economic data indicates a strong growth in the last quarter of 2016 and positive expansion prospects this year.  Let’s start:

1. Mark Carney speaks: Monday, 19:30. BOE Governor Mark Carney will speak in London. Mark Carney said last week that the bank of England is likely to improve its economic forecast next month despite Carney’s concerns over the Brexit aftermath. Market volatility is expected.
2. UK inflation data: Tuesday, 9:30. UK Consumer Prices edged up in November to 1.2% from 0.9% in October, amid a sharp rise in clothing and petrol prices. However the recent decline in sterling is expected to cause further increase in clothing inflation over the next year. In case sterling weakness continues to increase raw material prices, businesses will pass the costs on to buyers affecting consumer spending. The Bank of England expects inflation to continue to rise during 2017 to 2.7% and remain above the 2% target until 2020.
3. UK Employment data: Wednesday, 9:30. UK employment data was weaker than expected in November, as the number of people claiming unemployment benefits increased by 2,400 to 809,000 and the employment rate edged lower to 74.4% in the three months to October. This is the first real disappointment since the Brexit vote, showing the UK market is losing steam following the  EU referendum. Meanwhile, average pay picked up more than expected to 2.6%, or 2.5% excluding bonuses, but the number of people out of work considered “economically inactive” jumped by 76,000 over the period to 8.9 million.
4. US Inflation data: Wednesday, 13:30.  U.S. consumer prices grew at a slower pace in November, but the underlying trend continued to show inflation pressures amid rising rents. Consumer Price increased 0.2%, in line with market forecast, following a 0.4% increase in October. On a yearly base, the CPI increased 1.7%, the biggest year-on-year gain since October 2014. The CPI rose 1.6 percent in the year to October. The Fed raised its benchmark overnight interest rate by 25 basis points to a range of 0.50% to 0.75% as a vote of confidence in the economy. The central bank forecast three rate hikes in 2017 amid U.S. President-elect Donald Trump’s fiscal plans to boost growth through infrastructure spending and tax cuts.
5. Canadian rate decision: Wednesday, 15:00. Canada’s central bank maintained its overnight rate at 0.5% at its December’s meeting. Despite an improvement in global conditions, uncertainty remains high, badly affecting business confidence and investment. The BoC said that Canada’s economy has room for improvement and that the fiscal and trade policy is yet unknown. The Canadian dollar is losing strength and household imbalances have risen once again.
6. Janet Yellen speaks: Wednesday, 21:00. Federal Reserve Chair Janet Yellen will speak in San Francisco. Market volatility is expectd.
7. Eurozone rate decision: Thursday, 12:45. The European Central Bank kept interest rates unchanged in December but cut asset purchases to 60 billion euros per month, from the current 80 billion euros. The bank has prolonged the bond-buying program by nine months until the end of 2017, indicating the central bank does not intend to abandon its plans to boost the Eurozone’s economy.
8. US Building Permits: Thursday, 13:30. The number of US building permits in November shrank by 4.7% to 1.20 million-unit rate, remaining above the 1.20 million-unit level for three straight months. Single-family permits rose 0.5% while permits for multi-family units dropped 13.0%. Building Permits averaged 1357.47 Thousand from 1960 until 2016. Economists expect housing to continue growing despite rising mortgage rates after Trump’s election.
9. US Philly Fed Manufacturing Index: Thursday, 13:30. Manufacturing activity in the Philadelphia area weakened in December to 0.9 from 1.5 points in the previous month. New orders are  remained positive at 11.4 vs 3.1 in November. The 6-month outlook for new orders also edged up 18 points to 40.1. However, employment plunged to minus 12.2, and the workweek at minus 7.0. Nevertheless,  the strength and optimism for new orders indicate a strong finish to 2016.
10. US Unemployment Claims: Thursday, 13:30. The number of jobless claims remained low despite a 10,000 rise last week. Jobless claims reached 247,000 and the  four-week average, a less volatile measure, declined 1,750 to 256,500. The low level of claims indicates businesses are confident in future demand, therefore increase hiring. Business confidence has strengthened since the election in light of Trump’s plans to boost the economy. This could have a positive impact on future employment figures.
11. US Crude Oil Inventories: Thursday, 16:00. US crude stocks increased 4.1 million in the week ending on January 6. Analysts expected a small buildup of 0.9 million barrels. Refineries operated at 93.6% of capacity, processing 17.1 million barrels of crude and producing 9.7 million barrels of gasoline and 5.3 million barrels of distillate daily. Oil prices declined last week and are likely to continue this trend amid worries about the OPEC deal and the expectations for higher output from the U.S.

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

*All times are GMT.

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