Forex Weekly Forecast January 9-13 2012

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2012 began with another leg down for the euro, amid growing worries. The euro-zone’s rate decision is the highlight of the upcoming week. Here is an outlook for the major market movers.

Last week weekly jobless claims dropped to 372K continuing the recovery process in the labor market after 387K claims in the prior week. ADP Non-Farm Payrolls also surprised with a gain of 325K jobs in the private sector, much better than the 176K predicted. These wonderful readings led to the grand finale event, the Non-Farm Payrolls, surging higher than expected with an addition of 200,000 and another drop in the unemployment rate. These positive figures raise expectations for a stronger job market in 2012.

  1. UK rate decision: Thursday, 12:00. The Bank of England’s Monetary Policy Committee decided to maintain the official Bank Rate at 0.5% and refrain from increasing its quantitative easing. However, more QE is expected in February after the current £75bn of asset purchases is completed. No change is expected now.
  2. Euro-Zone rate decision: Thursday, 12:45.  The ECB members decided to cut the bench rate by 25 percentage points to 1.0%  ECB President Mario Draghi, declared  that the decision was not unanimous suggesting no further rate cuts in the next months. Draghi said that growth is expected to gradually recover next year and inflation is foreseen to remain stable. Draghi also announced that the ECB will adopt non-standard measures to aid banks offering offer three-year loans to prevent a credit default and called for a joint effort with fiscal consolidation to save the EU from recession. The same rate is expected now. Draghi might act in February on the rates.
  3. US retail sales: Thursday, 13:30.  U.S. retail sales figures were disappointing in November amid a drop in the food and beverages sector overshadowing the increase in motor vehicle sales. The low increase spoiled expectations of a strong holiday shopping season. Retail sales rose 0.2% following 0.6% increase in October and against the 0.6% increased forecasted by analysts and Core sales also increased 0.2% after rising 0.6% in October lower than the 0.5% rise predicted. Despite the strong sales reported days before the holidays the high unemployment rate and heavy discounts weighed on the actual figures. Both retail sales and core sales are expected to climb 0.3%.
  4. US Unemployment Claims: Thursday, 13:30. The jobs market is continuing its recovery with increased hiring in the private sector. Initial claims for unemployment continues to contract reaching 372,000 after 387,000 claims in the week before and a bit better than the 375,000 predicted by analysts. This positive trend gives hope for further improvement in the labor market in 2012. a further drop to 370,000 is expected now.
  5. US Trade Balance: Friday, 13:30. TheU.S. trade deficit narrowed in October to$43.5 billion despite a record increase of imports fromChina. September balance stood at $44.2 billion. The reading was consistent with analysts’ predictions. The smaller deficit suggests better growth rate for the fourth quarter. Deficit is expected to grow to $44.6 billion this time.
  6. US Initial UoM Consumer Sentiment: Friday, 14:55. The preliminary survey of consumer sentiment conducted by theUniversity ofMichigan, revealed an increase in confidence with a reading of67.7 in December following64.1 in November. This figure is higher than the 65.5 predicted suggesting increased confidence in theUS market. Another rose to 70.8 is predicted.

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

*All times are GMT.

Further reading:

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About Author

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

6 Comments

  1. HI Yohay,

    Always enjoyed your article. Can I find out for Euro, when there is a cut of rates, does it mean bullish or bearish for it?

    • Central Bank News on

      Interesting question Jon, usually you find when central banks cut interest rates it’s bearish for their currency because it squeezes the interest differentials (and makes it a less attractive long-leg for a carry trade)… however for the Euro it could end up being bullish if it is seen as something that will help the EU economy, and of course help the survival of the Euro.

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