The US dollar was in full control and the euro was the big loser in an exciting week of trading. There is not much time to rest as a new week begins with the results of the Greek Elections and is followed by GDP data from the US, the UK and Canada and the Fed decision among other events. These are the most important economic releases for this week. Follow along as we explore these Forex market movers.
The central event was Draghi’s announcement of an extensive bond-buying program which will insert more than one trillion euros into the system. The €60 per month pace and the planned size exceeded expectations and so did the option to extend the program depending on inflation expectations. Most of the buying will be made by the national central banks rather than the ECB. The markets initially paid attention to the decentralization but eventually the euro was sold off quite sharply, even trading below 1.12. Elsewhere, Chinese GDP slightly beat expectations but this helped the Aussie only temporarily, before AUD/USD lost the 0.80 line. The Bank of Canada surprised with a rate cut that hurt the loonie and weak inflation in New Zealand hurt the kiwi. GBP/USD fell below 1.50, partly because the minutes revealed a unanimous decision not to raise rates. Will this dollar domination continue?Updates:
- Greek Parliamentary Election: Sunday. The national elections this week will determine whether Prime Minister Antonis Samaras will maintain his position or be defeated by Alexis Tsipras from Syriza party. Samaras said he can reach an agreement with Greece’s creditors by the end of February, while Tsipras said he can get an agreement by this summer keeping Greece within the euro area. Greece will not receive the next bailout money of 7.2 billion euros unless a review of the country’s progress in meeting the terms of its bailout is completed by Feb. 28. Recent polls show a victory for SYRIZA, but it is unclear if they can command an absolute majority in parliament. A win for the opposition is slightly euro-negative while a victory for incumbent New Democracy would boost the common currency.
- German Ifo Business Climate: Monday, 9:00. German business confidence increased 0.8 points in December, reaching 105.5, broadly within market expectations. Falling oil prices and the weaker euro boosted German economy. Economic data showed improvements in the manufacturing and wholesaling sectors despite downturn trend in sales to Russia and sluggish reforms in France and Italy. Business sentiment is expected to reach 106.7 this time.
- UK GDP data: Tuesday, 9:30. U.K. economic growth weakened in the third quarter, amid sluggish economic activity in the euro-area. Gross domestic product increased 0.7% in the three months through September, following 0.9% rise in the second quarter. The reading was in line with market forecast. On an annualized basis, the U.K. economy expanded 2.8% in the third quarter. Worrying signs of renewed stagnation in the euro zone may have a negative effect on UK’s. UK growth is predicted to be 0.6% in the fourth quarter of 2014.
- US Durable Goods Orders: Tuesday, 13:30. Durables orders plunged 0.7% in November after gaining 0.3% in October, while analysts expected a 3.0% jump. Likewise, core orders dropped 0.4% in November after contracting 1.0% in the prior month. Analysts predicted a 1.2% rise. Transportation declined 1.2% a 3.3% jump in October. The rise in autos and non defense aircraft was overshadowed by a sharp drop in defense aircraft orders. Both Durable orders and Core orders are expected to gain 0.6%.
- US CB Consumer Confidence: Tuesday, 15:00. American consumers were more positive in December amid strong economic data releases. Consumer sentiment climbed to 92.6 in December from a revised 91 in the previous month. 17.1% of responders noted a rise in job availability from 16.2% in November. 19.6% claimed business conditions were worse compared to 21.8 in November. The rise in confidence goes hand in hand with GDP growth and the constant improvement in the job market. A further increase to 95.7 is expected now.
- US New Home Sales: Tuesday, 15:00. Sales of new U.S. homes contracted 1.6% in November to a seasonally adjusted annual rate of 438,000 units, indicating the housing sector still hasn’t benefited from the recent improvements in the job market. The reading was worse than the 461,000 rate forecast by analysts and lower than October’s downwardly revised rate of 445,000. New-home sales remain far below the annual rate of 700,000 seen during the 1990s, as many Americans lack solid credit records to enable obtaining mortgages. Sales of new U.S. homes is expected to reach 452,000 in December.
- US rate decision: Wednesday, 19:00. The Federal Reserve policy makers have repeatedly announced their intentions to raise rates during 2015. However the sharp plunge in consumer prices during December may detain such a move. Federal Reserve chair Janet Yellen, claimed that the sharp drop in oil prices was positive for the US economy boosting household spending, but other Fed policy makers prefer to see stronger inflation before voting to raise rates. The Fed’s focus is on core inflation to help assess underlying price pressures in the economy. Fed official said recently that mid-year would be an appropriate time to consider a rate rise. No change in rates is expected but every word in the statement will be analyzed. No press conference nor forecasts accompany this decision.
- NZ rate decision: Wednesday, 20:00. The Reserve Bank of New Zealand has maintained its Official Cash Rate at 3.5% in December in line with market forecast. The central bank estimates output will grow above capacity and inflation will reach the 2% target by the end of the forecast period, which will advance a 40 basis points rate hike by early 2017. Reserve Bank of New Zealand Governor Graeme Wheeler repeated his warnings about the overrated New Zealand dollar but noted that global financial market volatility had taken some pressure off the currency. While no change is expected, a rate cut cannot be ruled out after the surprising cut from the Bank of Canada.
- US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits was higher than expected last week, indicating the holiday volatility sill continues. Jobless claims declined by 10,000 to 307,000, while expected to reach 301,000. Layoffs of holiday staffing make it difficult to assess the true state of the weekly jobs data. However, except for these temporary layoffs the US job market remains resilient at the beginning of 2015. The number of jobless claims is expected to reach 301,000 this week.
- Canadian GDP: Friday, 13:30. Canada’s economy expanded more than expected in October rising 0.3% following a 0.4% gain in the previous month. Analysts expected a small increase of 0.1%. However weak oil prices are forecasted to weaken growth in 2015 by contracting exports and investment. The BOC projects a yearly growth of 2.2% in 2015 from 2.5% growth in 2014. However exports to the US are expected to increase as the US economy strengthens. Canadian growth is expected to contract 0.1%.
- US GDP data: Friday, 13:30. The U.S. economy expanded 5% in the third quarter, indicating the US economy continues to improve and has no need for further QE. The final GDP release was stronger initial reads. Business investment and consumer spending dropped slightly from the second quarter, however, trade deficit contracted. Growth in four of the past five quarters reached 3.5% or above suggesting self- sustaining growth. Us economic growth in the fourth quarter is expected to be 3.1%.
That’s it for the major events this week. Stay tuned for coverage on specific currencies
*All times are GMT.
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- For EUR/USD, check out the Euro to Dollar forecast.
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- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the kiwi, see the NZDUSD forecast.
- For USD/CAD (loonie), check out the Canadian dollar
- For the Swiss Franc, see the USD/CHF forecast.