Overview of Major Market Moving Events For 1st Week of 2016

Author Anil Panchal Category Fundamental Analysis 05 Jan 2016 Updated at 12:06 CET
Thanks to Federal Reserve’s first in a decade interest-rate hike, the US Dollar Index (I.USDX) managed to mark consecutive third yearly gains; though, the greenback gauge dipped lower during last week, mainly due to weaker Jobless and housing market details, and extended the same losing streak, because of six year low ISM Manufacturing Index, through initial days of first full week of 2016. Moving on, currencies of Europe and Japan marked their annual losses against its US counterpart as monetary policy divergence between the Fed and rest of the global central bankers helped favoring the USD buying while Chinese markets, which registered noticeable plunge during first trading day of the current year, failed to overcome its fundamental drawbacks and adversely affected major commodity currencies like AUD and NZD. Moreover, UK currency also struggled against the US Dollar as downbeat data-points, including the recently published headline PMIs, faded speculations of an early monetary tightening by the Bank of England and the Crude prices remained jittered with global supply-glut dragging down the energy prices and the Canadian Dollar.

As global financial markets stepped forward into the fresh year after a long holiday season, there are many important data-points/events scheduled to publish throughout the week that might trigger considerable volatility into the world’s largest financial market. Notable amongst them are headline PMI numbers from US & UK, monthly details of US & Canadian labor markets and minutes of December FOMC meeting. Moreover, Inflation numbers from China and Europe, coupled with Trade Balance details from Australia and Canada and the Australian Building Permits are some other indicators that would provide busy trading schedule to market participants.
Greenback Traders To Observe US Job Numbers And FOMC Minutes

During the announcement of its much awaited rate hike, the US central banker also mentioned that it expects additional four 0.25% interest-rate lifts during 2016, in addition to the one announced in December; though, all of them would be data-dependent and hence increasing the importance of upcoming headline data-points.

The US labor market details, one of the two important indicators that the Fed considers to examine the strength of its economy and further monetary policy moves, is scheduled during this Friday and is expected to largely govern the USD moves. Forecasts suggest that Unemployment Rate and Average Earnings are will remain unchanged from their respective priors of 5.0% and 0.2% while the NFP could mark a bit weaker print of 202K against its previous 211K. Other than job details, minutes of the crucial December meeting, scheduled for Wednesday release, become one more important event of the week not only because the interest rates were pushed up during the said meeting, but also due to the economic forecasts revealed and the discussed future path of Fed’s future monetary policy. The monetary policy makers held majority of their economic forecasts intact during the said meeting and the Fed Chair spread hawkish words for the strength of world’s largest economy.

Even if downbeat employment details could drag down the US Dollar, the decline might be tepid as these are the first one to be published in the current year while optimistic comments revealed via minutes may provide a chance for the greenback to put its foot forward for another gaining series.
In addition to FOMC meeting minutes and labor market numbers, monthly releases of ISM Non-Manufacturing PMI, ADP Non-farm Employment Change and Trade Balance are some other US details scheduled during the week that could also help determine near-term USD moves.

Looking at the consensus, Wednesday’s ISM Non-Manufacturing PMI is likely extending its advance with 56.00 mark versus 55.9 prior while ADP Non-Farm Employment Change is expected to print 193K against 217K prior and the Trade Balance number, also scheduled for Wednesday, may reveal a bit higher deficit of -44.0B compared to -43.9B prior. As majority of scheduled indicators favor short-term USD weakness, chances of the greenback registering positive weekly closing can only be strengthened on upbeat actual numbers.

European And UK Factors

Following mixed results of UK Manufacturing and Construction PMI, coupled with weaker than expected EU Flash CPI, Services PMI and Trade Balance details from UK, in addition to the German Factory Orders, are the rest of the economic factors scheduled for release from Britain and Europe during the current week.

After Flash version EU CPI failed to match 0.4% consensus and marked the same 0.2% as prior, Euro traders will look towards the monthly reading of German Factory Orders, up for Thursday release, to determine immediate EUR moves. The order detail is expected to print 0.1% mark against its four-month high of 1.8% growth marked during previous release. With weaker inflation number favoring a pullback of recent EUR gains, downbeat factory orders and ECB’s lose monetary policy could continue favoring broader weakness of the regional currency.

Monthly release of Services PMI, the core to UK GDP, is up for release during Wednesday and may read 55.6 mark against 55.9 prior while the Trade Balance numbers, scheduled for Friday, could show thinner trade deficit of -10.5B versus -11.8B. Given the Services PMI join the upbeat Construction PMI release, and the Trade Balance also match expectations, the GBP might gather strength to counter its recent downside; however, these figures are less likely to fuel considerable up-move of the Britain’s currency unless being drastically positive.
Releases From China, Australia And Canada Are The Rest To Watch

Other than important releases from global majors, Trade Balance details from Australia and Canada, Chinese Inflation and Services PMI, Australian Building Approvals and Retail Sales, and the Canadian job details become the rest of the important data-points to look at while going forward.

Having witnessed dismal manufacturing numbers from China, monthly details of Caixin Services PMI and Inflation numbers, scheduled for Wednesday and Saturday respectively, may help determine the inflationary pressure onto the troubled economy. While the CPI is expected to improve a bit from its 1.5% prior to 1.7% and the PPI is also likely to mark -5.8% versus -5.9% prior, the Services PMI may continue signaling improvement by printing 52.3 mark against 51.2 prior. Should headline inflation print subdued numbers, and the Services PMI also join the recently published downbeat readings, chances of further weakness into the commodity prices and the commodity currencies, namely, AUD, CAD and NZD, can’t be denied.
Although pessimism at China continuously signal negative remarks for Australia, economics reveal the different story off-late and has been helping the RBA avoid further rate cuts and supporting short-covering rally in Aussie prices. The Building Approvals, up for Thursday, is expected to mark its first contraction in three months with -2.8% against +3.9% prior while the Trade Deficit may shrink to -2.98B against -3.31B during the same day announcement. Moreover, Friday’s Retail Sales number is also likely to mark a bit slower growth 0.4% against 0.5% prior. Weaker prints of the scheduled data-points could magnify Chinese pessimism on Australian economy and may force the Australian central banker (RBA) towards an interest-rate cut, resulting reversal of recent AUD up-move.

While tensions between Iran and Saudi Arabia helped limiting the Crude downside, the Canada’s main export, December month Canadian labor market data and Trade Balance could provide additional details to determine further moves of the Loonie, as it is nicknamed. Wednesday’s Trade Balance is likely revealing smaller trade deficit of -2.6B against -2.8B prior while the Employment Change could reverse its prior -35.7K decline with +10.4K mark. Moreover, the Unemployment Rate is expected to remain stagnant at 7.1%. With the middle-east geo-political tensions helping the Crude short-covering, and in-turn the CAD recovery, upbeat job details may help the Loonie recover some of its losses.
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