Major Market Moving Events For 5th Week of 2016

Author Haresh Menghani Category Fundamental Analysis 01 Feb 2016 Updated at 12:53 CET
Last week's headlines were stolen by the Bank of Japan, which delivered a shock announcement to the Forex market by cutting its deposit rate into negative territory. The FOMC, on the other hand, maintained status-quo but sounded dovish on the back of recent global economic concerns. Following the BoJ announcement, USD soared against JPY, helping the overall USD Index (I.USDX) to erase all of its weekly losses and end with a gain of over 0.8% for the month of January. USD was also supported by the fourth-quarter reading on economic growth that was roughly in-line with consensus forecast, negating the effects of disappointment from durable goods orders data that fell by 5.1% in December.
Moving forward, market participants will now shift their focus on a slew of important economic releases and events lined-up at the beginning of a new month. Here is a brief outlook of some key drivers from this week's busy economic calendar that are likely to infuse decent volatility in the Forex market.
Center of attraction - US jobs report
Although last week's FOMC statement was considered to be dovish, the central bank did not alter its plans to continue raising rates in 2016. The rate hike, however, continues to be dependent on the incoming economic data and hence, this week's US labor market reports is likely to play a major role in determining the possibilities of a rate hike in March. The US labor market has witnessed steady growth, boosting investor confidence in the US economic recovery. Following dismal prints for four consecutive months since June 2015, US jobs report (popularly known as NFP) has surpassed even the most optimistic expectations for three-consecutive months till Dec. 2015. The unemployment rate has also been held steady from Oct. 2015 at 5.0%, the lowest level since May 2008. Meanwhile, this week's report for the month of January is expected to show a drop in the number of new jobs added to the economy by printing a figure of 192,000. The weaker number, however, is unlikely to have any major impact on USD strength unless the data disappoints by a huge margin. The unemployment rate is also expected to remain steady at 5.0% while the average hourly earnings is expected to rise by 0.3% as against flat reading in December.
Preceding the official jobs report, the ADP report, which shows the number of private-sector jobs addition, would provide an early estimate for Friday's official report. After an unexpected surge in December, marking a reading above 200,000 mark for two consecutive months, the ADP report is expected to show an addition of 193,000 new private-sector jobs in January.
This week’s US economic calendar also features the release of ISM manufacturing and non-manufacturing PMI figures on Monday and Wednesday respectively. The ISM manufacturing PMI for the month of January is expected to continue reflecting contraction in manufacturing activity by printing below 50 reading. Meanwhile, with an expected reading of 55.1, the ISM non-manufacturing PMI would continue reflecting expansion in January but at a slightly slower pace as compared to 55.3 recorded in December. This would be accompanied by trade balance data on Friday, which is expected to come-in at $42.9 Billion for December.
Central bank to remain in focus
Following last week's surprise move from the BoJ, investors will keep a close watch on this week's central bank actions for any hints of further monetary easing. The Reserve Bank of Australia (RBA) is set to announce its monetary policy decision on Tuesday. With recent improvement in inflation data, economists are expecting RBA to hold back and keep its key lending rates unchanged. However, a dovish economic outlook in RBA's Monetary Policy Statement, scheduled for release on Friday, might be considered as a hint towards a possible rate cut by the central bank during the up-coming meetings.
The Bank of England (BoE) will host another 'Super Thursday' with the scheduled release of the quarterly inflation report, monetary policy summary, official bank rate and MPC votes. In its quarterly inflation report, BoE is expected to update its inflation projection and economic growth over the next 2 years. With BoE Governor Mark Carney has already hinted that the central bank is unlikely to begin raising interest rates in the coming months, his comments during a subsequent press conference might now be scrutinized for cues to determine the timing of an interest rate hike. Hence, this week's BoE releases are likely to key drivers for GBP pairs.
Elsewhere, in the context of recent comments by ECB President Mario Draghi hinting towards adding further stimulus, his testimony before the European Parliament on Monday will be closely scrutinized to support expectations of another round of easing measures announcement by the central bank during the March meeting.
Other economic indicators that might also keep GBP and AUD pairs excited during the week includes, UK construction and services PMI on Tuesday and Wednesday respectively, along-with latest print of Australian trade balance on Wednesday and monthly retail sales data on Friday.
New-Zealand and Canadian job numbers
Employment data is one of the key indicators that assists investors in determining the overall health of any economy and hence, this week's employment reports from New-Zealand and Canada might trigger some volatile moves for NZD and CAD pairs respectively. New-Zealand's quarterly employment details are scheduled for release on Wednesday and monthly release of Canadian jobs report is scheduled on Friday. However, compared to the scheduled release of NFP data later during the week, the releases are unlikely to have a major impact on the Forex market.
With several top-tier macroeconomic releases on tap, traders in Forex market are likely to witness meaningful and volatile moves in the currency market. Moreover, stronger-than-expected US jobs number, which would add to expectations of continuing US economic growth and might lead to renewed investor interest to buy USD, thus acting as a catalyst for near-term strength for USD.
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