Major Market Moving Events For 4th Week of 2016

Author Haresh Menghani Category Fundamental Analysis 25 Jan 2016 Updated at 12:52 CET
It was yet another week of divergent move for the US Dollar (USD) against other major counterparts. The greenback strengthened against EUR and JPY on expectations of further monetary stimulus by the respective central banks. Against commodity currencies, USD lost some ground on the back of recovery in crude oil prices. CAD was also helped by BOC's decision to refrain from additional monetary easing. GBP on the other hand, rebounded from oversold territory on the back of upbeat UK jobs and inflation details. Nevertheless, the overall USD Index (I.USDX), which measures USD strength against a basket of currencies, managed to register a second consecutive week of advances.
Following last week's dovish ECB, the financial markets focus will remain on central banks as the Fed, RBNZ and BOJ are scheduled to announce their monetary policy decisions during the course of the week. Apart from the rate decisions, investors will also confront the release of GDP data from the US and UK, and other important releases, which are line-up in this week's economic calendar. Let's have a brief overview on some major market moving releases.
Central Banks in Focus
Amongst major central bank events, outcome of the Federal Reserve's two-day monetary policy meeting is scheduled to be announced on Wednesday. Following a widely expected decision to raise its key interest rate in December, from a range of 0%-0.25% to a range of 0.25%-0.50%, a no change in benchmark interest rates is expected this time. However, following the recent turmoil in capital markets, market participants will be keen to evaluate the timing of the next rate-hike announcement. Although the probability of such a move in March looks slim, should the central bank stick to its 100 bps rate-hike projection in 2016, the USD could witness some serious appreciating move.
On Thursday, the central bank of New-Zealand (RBNZ) is scheduled to announce its monetary policy decision. Following its decision to lower its benchmark rates for four times in the second half of 2015 to 2.50%, the market still remains divided that RBNZ might still consider cutting rates to bring the economy back on track. Economist are not expecting a cut this week, however, should the central bank shows its readiness to ease further, NZD is likely to remain on the back-foot and extend its downward trajectory.
The Bank of Japan (BOJ) is also scheduled to announce its monetary policy decision on Friday, which will be followed by a press conference. Consensus are expecting a no change to the current central bank's monetary policy stance. However, central bank's views about the economic conditions will be closely scrutinized to see if the central bank continues to show willingness to expand its economic stimulus measures further. While there still remains an outside chance that the central bank might introduce additional stimulus measures, should the central bank hints no hurry to ease further and adopt a wait-and-see approach, traders might be forced to scale back their JPY bearish bets, eventually leading to extension of the near-term decline for USDJPY.
GDP Releases
On Friday, the government is schedule to release the first estimate of US economic growth for the fourth-quarter of 2015. After expanding at an annualised pace of 2% in the third-quarter, US Q4 GDP is expected to reflect the effects of global slowdown by registering a lacklustre growth of 0.8%.
From UK, market players will be looking for the first reading of GDP growth rate for the fourth-quarter of 2015. The data, which is scheduled for release on Thursday, is expected to show UK economy growing by 0.5% in Q4 2015. The slower pace of recovery would suggest that the central bank might not be in a hurry to start raising interest rates, thus continue dragging GBP lower in the near-term.
Also in the list of GDP releases is the monthly Canadian GDP data, which is released on monthly basis rather than on quarterly basis, and is also scheduled for release on Friday. Falling commodity prices, especially a sharp fall in crude-oil prices, is expected to continue weighing on the growth number, which is expected to show yet another month of contraction in the economy.
US Economic Releases
From the US, data pertaining to durable goods orders, scheduled on Thursday, will be watched keenly to support the optimistic views of a steady US economic recovery. However, adding to the China led slowdown fears core durable goods orders (excluding transportation) have risen only once in the past four months and durable goods orders were also flat during November. For the month of December, economists are expecting durable goods order to decline by 0.7% while core durable goods orders are expected to remain flat.
From the US housing sector, fresh readings on new home sales and a forward looking indicator of the US housing sector, pending home sales, are scheduled for release on Wednesday and Thursday respectively. US housing sector remains on strong recovery path and this week's data will assist investors to further gauge health of the sector.
The US economic calendar also features the release of leading indicators of consumer spending, Conference Board's consumer confidence index and Revised UoM Consumer Sentiment for the month of January, scheduled for release on Tuesday and Friday respectively. Also watch-out for Chicago PMI data, which is scheduled for release on Friday and is expected to remain in contraction territory for third consecutive month in January.
Other Notable Releases
Elsewhere, market players will confront the latest reading of composite Euro-zone inflation details, scheduled for release on Friday. The flash version of the Euro-zone headline inflation for the month of December is expected to register a further rise to come-in at 0.4% while the core CPI (excluding food, energy, alcohol, and tobacco) is expected to hold steady at 0.9%.
Meanwhile, economic releases that could possibly impact movement for the Australian Dollar (AUD) includes the release quarterly CPI data for the quarter ended Dec. 2015 and is scheduled for release on Wednesday. Australian CPI, for the last quarter of 2015 is expected to have declined, with consensus estimating the measure to come-in at 0.3% as compared to 0.5% recorded in the third-quarter of 2015.
With a slew of major influential central bank monetary decisions and top-tier macroeconomic releases on tap, traders are likely to witness some meaningful and volatile moves in the currency market.
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