The dollar continued to remain on the backfoot for another week. However, it was not a one-sided affair. The greenback did fight back to some extent though mixed housing data and the threat for a government shutdown loomed large. It is the bullish comments from some of the Fed officials as regards the economy that helped the currency put up a strong fight.
The news from the previous week that China might move away from U.S. Treasuries continued to put pressure on the greenback. However, a correction was also observed, especially in USD/JPY pair. In the euro-zone, European Central Bank officials’ effort to use the strategy ‘talk-down-the-euro’ met with only partial success. As U.K.’s inflation data came out as analysts expected and some amount of calm prevailed on the Brexit front, the pound could stabilize a little bit.
In Canada, the Bank of Canada raised the overnight rates. The loonie, however, remained range-bound because of NAFTA worries. Meanwhile, Australia gained from yet another encouraging jobs report and Chinese GDP.
In the upcoming week, the key data releases include the GDP from the U.K. and the U.S., rate decisions from the Eurozone and Japan. Here is an outlook on these as well as some of the key ones from elsewhere in the world:
#1: Bank of Japan Monetary Policy Statement (01/23/2018 Tuesday 03:00 GMT)
The Bank of Japan releases the Interest Rate Statement eight times in a year. It is one of the central bank’s primary tools for communicating with investors as regards the monetary policy. The statement provides the outcome of the members’ decision on setting the interest rate and asset purchases. It also talks about the economic data that impacted their decision. More importantly, it provides an economic outlook and clues on future decisions.
#2: Bank of Japan Policy Rate (01/23/2018 Tuesday 03:00 GMT)
The Japanese central bank decided to leave the key Policy Rate unchanged at -0.1 percent during the meeting in December last year as was widely expected. Additionally, the policymakers maintained the yield target for 10-year government bond at about zero percent. However, the provided a more encouraging views on capital expenditure and private consumption.
Recently, the Bank of Japan triggered a “mini taper tantrum” in bond markets. As far as developed countries are concerned, Japan offers a very accommodative monetary policy. The question is whether this is going to change. This is not likely to change very soon because inflation continues to be too low and the central bank would want to maintain a low yen exchange rate as long as it can.
In the meeting this month, the central bank is likely to continue to maintain the interest rates at the current level of -0.1 percent. The Bank of Japan is also expected to continue with the bond-buying program.
#3: Bank of Japan Outlook Report (01/23/2018 Tuesday 05:00 GMT)
The Bank of Japan releases the Outlook Report on a quarterly basis. The report provides valuable insight into the central bank’s view of the country’s economic situation and inflation, the key factors considered for shaping the monetary policy in the future.
#4: Bank of Japan Press Conference (01/23/2018 Tuesday 06:30 GMT)
The Bank of Japan holds a press conference after announcing the Policy Rate. The central bank uses it as a tool for communicating with investors as regards monetary policy decisions. In the press conference, some of the aspects discussed are the factors that impacted the most recent Policy Rate decision, the country’s overall economic outlook, and inflation status. Clues on future monetary policy decisions are also provided.
#5: U.K. Average Earnings Index (01/24/2018 Wednesday 09:30 GMT)
The total earnings of U.K. workers, including bonuses, rose by 2.5 percent to £510 per week on a year over year basis during the three months to October 2017 after figure for the prior period was revised upward to an increase of 2.3 percent. The reading for October 2017 was in line with analysts’ expectations. Excluding bonuses, earnings increased 2.3 percent to £478 per week after registering a 2.2 percent gain in the prior period. This was slightly more than analysts’ expectation for an increase of 2.2 percent. However, earnings including bonuses fell 0.2 percent (in real terms) for the seventh consecutive month and earning excluding bonuses dropped 0.4 percent for the eighth in a row as nominal wage growth continued to lag behind inflation. Forecast for the next period: increase of 2.5 percent including bonuses
#6: U.S. Crude Oil Inventories (01/24/2018 Wednesday 15:30 GMT)
In the U.S., crude oil stocks dropped 6.861 million barrels during the week that ended on January 12, following the 4.948 million barrel decline in the previous week. Analysts had expected the crude oil stocks to decline by only 3.588 million barrels. With this, the crude oil stocks have fallen for nine consecutive weeks. Gasoline stocks rose by 3.62 million barrels after registering an increase of 4.135 million barrels in the prior week. The reading for the week came in above analysts’ expectation for an increase of 3.426 million barrels.
#7: New Zealand CPI (01/24/2018 Wednesday 21:45 GMT)
In New Zealand, consumer prices rose by 0.5 percent in the third quarter of last year after remaining steady in the previous two quarters. Analysts’ had expected consumer prices to increase by 0.4 percent. Price increase was driven by food items, alcoholic beverages, tobacco, and household goods and services. On a yearly basis, consumer prices increased 1.9 percent after gaining 1.7 percent in the prior quarter. Forecast for the final quarter of last year: 0.4 percent increase
#8: European Central Bank Minimum Bid Rate (01/25/2018 Thursday 12:45 GMT)
The European Central Bank decided to hold the benchmark minimum bid rate at 0.0 percent during the monetary policy committee meeting in December. This was widely expected by the market. The central bank also confirmed that the net asset purchases from January 2018 would be €30 billion. This is expected to continue at least till September next year. It may be extended if required.
The central bank has raised the inflation forecast for the current year to 1.4 percent from the previously estimated 1.2 percent because of higher food and oil prices. The projection for 2019 was maintained at 1.5 percent. Forecast for January 2018: 0.00 percent
#9: Canada Core Retail Sales (01/25/2018 Thursday 13:30 GMT)
Canada’s core retail sales, excluding automobiles, rose by 0.8 percent in October, following the 0.4 percent increase in the previous month. Analysts had expected the retail sales to increase by 0.4 percent in October.
#10: European Central Bank Press Conference (01/25/2018 Thursday 13:30 GMT)
The President and Vice President of the European Central Bank participate in a press conference scheduled to be held approximately 45 minutes after the announcement of the Minimum Bid Rate. The press conference, held 8 times in a year, lasts for about an hour and has two parts. In the first part, a prepared statement is read. The second part of the conference is open questions by the press. As the questions lead to unscripted answers at times, heavy market volatility can be expected.
#11: U.S. Unemployment Claims (01/25/2018 Thursday 13:30 GMT)
The number of American people filing for jobless benefits dropped 41,000 to 220,000 during the second week of this year. The reading came in well below analysts’ expectation of 250,000. This is the lowest number of claims since February 1973. However, claims taking procedures remained disrupted in the Virgin Islands. In Puerto Rico, normalcy in claims taking procedure has still not been achieved. Forecast for the next period: 236,000 claims
#12: U.K Prelim GDP (01/26/2018 Friday 09:30 GMT)
The British economy grew 0.4 percent on a quarter-on-quarter basis in the September quarter of last year, following an expansion of 0.3 percent in the prior period. The final estimate was the same as the second estimate. Household consumption increased at a stronger pace, while growth in fixed investment softened. Forecast for the final quarter of last year: 0.4 percent
#13: Canada CPI (01/26/2018 Friday 13:30 GMT)
Canada’s annual inflation rate rose to 2.1 percent in November, its highest level in about a year, signaling that economic is pushing consumer prices up. According to Statistics Canada, the inflation reading came in higher than October’s 1.4 percent rate because of higher air transportation and gasoline costs compared to that for the previous year. On a monthly basis, consumer prices 0.30 percent in November.
#14: U.S. Advance GDP (01/26/2018 Friday 13:30 GMT)
The U.S. economy grew an annualized 3.2 percent in the third quarter of from the previous quarter as per the final estimate. This is slightly below the second GDP estimate of 3.3 percent and analysts’ expectation of 3.3 percent. Still, this is the largest expansion ever since the March quarter of 2015. Both net trade and personal consumption contributed less than what was initially expected, while government spending increased. Forecast for the fourth quarter of last year: annualized 3.0 percent growth
#15: U.S. Core Durable Goods Orders (01/26/2018 Friday 13:30 GMT)
In the U.S., the orders for core durable goods (ie. non-defense capital goods excluding aircraft) slipped 0.1 percent in the month of November from the previous month. The data for the month of October was revised to represent an increase of 0.8 percent in core durable goods orders. Previously it was reported as 0.3 percent increase. Economists had expected core durable goods orders to grow by 0.5 percent in November. On a year-on-year basis, core durable goods orders grew 5.1 percent.
#16: Bank of England Governor Mike Carney Speaks (01/26/2018 Friday 14:00 GMT)
Mike Carney, Governor of the Bank of England, is scheduled to speak at the World Economic Forum in Davos, participating in a panel discussion titled “Global Economic Outlook”. Markets remain volatile during his speeches as traders make an attempt to get clues on the direction of interest rates.
#17: Bank of Japan Governor Haruhiko Kuroda Speaks (01/26/2018 Friday 14:00 GMT)
Haruhiko Kuroda, Governor of the Bank of Japan, is scheduled to speak at the World Economic Forum in Davos, participating in a panel discussion titled “Global Economic Outlook”. Markets remain volatile during his speeches as traders make an attempt to get clues on the direction of interest rates.
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