Major Market Moving Events For 3rd Week of 2016

Author Haresh Menghani Category Fundamental Analysis 18 Jan 2016 Updated at 12:23 CET
Amid the ongoing carnage in commodities and global equity markets, the US Dollar (USD) ended the previous week by dropping against the perceived safety of the Japanese Yen (JPY). Also against EUR, the greenback gave-up all of its early week gains and ended the week on a flat note. The US Dollar weakness against JPY and EUR, however, was negated by its strength against the commodity currencies. The commodity currencies, namely - CAD, AUD and NZD, were slammed on the back of crash in crude oil prices and the Chinese currency (Yuan) devaluation. The USD also appreciated against GBP, which fell to a new multi-year lows as the Bank of England minutes revealed that policymakers retains a wait and watch approach by keeping interest levels at 0.50%. The diverging USD movement against other major currencies helped the overall USD Index (I.USDX) to finish the week with a gain of over 0.4%.
 
Meanwhile, the US economic data were mixed with monthly retail sales and industrial production data came-in below consensus estimates, which was partially negated by the release of six month high US Consumer Confidence data.
 
As the new trading week begins, investors turn their focus to this week's economic calendar which features some important market moving releases/events and should trigger some volatile moves in the Forex market. Let's have a look at some important highlights lined-up during the course of the week.
 
Center of Attraction – Chinese Data
Of-late, the main concern for global investors has been the economic slowdown in the world’s second largest economy, China. Hence, Tuesday's release of GDP and industrial production data from mainland China will be the center of attraction and will continue to dominate global investor sentiment. Chinese GDP print for the fourth-quarter of 2015 is expected to match third-quarter reading of 6.9% growth. Simultaneously, Chinese industrial production data for the month of December will also be published. Industrial production for the month of December is expected to show a growth of 6.0% on a year-on-year basis, down from 6.2% recorded in November.
 
US Releases
From the US, inflation data, Philly Fed manufacturing index and housing data stand out as the important market moving events for the upcoming week. The latest reading on US headline inflation, consumer price inflation (CPI), is scheduled for release on Wednesday. After a flat month-on-month reading in November, consensus estimates are again expecting the reading to remain flat for the month of December. On the other hand, Core CPI, which excludes the volatile food and energy, is predicted to show another month-on-month rise of 0.2%.
 
The release of government's report on building permits and housing starts for the month of December are also scheduled for release on Wednesday. Economists expect the positive momentum in the US housing sector to continue, with the number of building permits anticipated to come-in at an annual pace of 1.20 million units, slightly lower than 1.28 million units recorded in November. Meanwhile, housing starts data is expected to outpace previous month's reading of 1.17 million units pace by printing 1.19 million units in December.
 
Moving on to the release of Philly Fed manufacturing index for the month of January, scheduled on Thursday. Although, the reading is expected to remain below zero, reflecting worsening manufacturing conditions in the Philadelphia area, but is still expected to show some improvement from an unexpected sharp decline in December. US manufacturing data is always watched closely in order to gauge the health of manufacturing sector in the world's largest economy.
 
ECB and BoC Monetary Policy Decisions
Apart from the US and Chinese economic data, monetary policy decision announcements from the European Central Bank (ECB) and the Bank of Canada (BoC) will also be on investors watch list for the current trading week.
 
ECB is scheduled to announce its monetary policy decision on Thursday. Although, ECB is not expected to make any major announcement, a subsequent press conference will be closely scrutinized for the central bank's assessment on inflation and economic growth, which might lead to some volatile move for EUR pairs.
 
Ahead of the ECB, BoC is also scheduled to announce its monetary policy decision on Wednesday. Given the Canadian economy's heavy dependence on crude oil, which has already fallen below $30/barrel to hit a fresh 12-year lows, the central bank is expected to cut its benchmark rates by 25 bps from 0.50% to 0.25% in order to support economic revival and fight deflationary pressure.
 
In addition to the monetary policy decisions, investors will scrutinize the final Euro-zone CPI reading and German ZEW economic sentiment, scheduled for release on Tuesday. Traders will also watch-out for the release of Canadian CPI and monthly retail sales data on Friday.

Euro-Zone PMI Data
From the Euro-zone, investors will be also be focusing on the release of PMI data, a leading indicator of economic health, for both manufacturing and services sector from the Euro-zone. The flash reading of the PMI numbers from Euro-zone's two largest economies, France and Germany, along with the broader Euro-zone PMI for the month of January are scheduled for release on Friday. Both, manufacturing and services PMI numbers are expected print above 50, the dividing point between expansion and contraction territories, indicating expansion in the overall business activity in the Euro-zone.
 
Important UK Economic Data
From UK, UK inflation data, employment report and retail sales data are likely to probe some volatile moves for GBP pairs during the week.
 
The latest print of the UK inflation data, which turned back positive in November, is scheduled for release on Tuesday. Economists are expecting another rise of 0.1% for the month of December. Moving on to the UK labor market report, which is scheduled for release on Wednesday, is expected to show the number of people claiming for unemployment related benefits to rise by 4,100 and the unemployment rate is expected to hold steady at 5.2%.
 
Meanwhile, consumer spending, which remains supportive pillar of UK's economic recovery, is scheduled for release on Friday. Following a sharp uptick in November, the indicator is expected to show a decline of 0.1% during the month of December.
 
 
With the risk-off sentiment already dominating global financial markets since the beginning of 2016, any further deterioration on the economic data front (especially from China) might continue to force investors to deleverage their long USD bets against JPY and EUR. However, the risk aversion sentiment might continue boosting USD demand, especially against commodity currencies.
 
 
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