The Forex Week Ahead

The Forex Week Ahead: January 15th – 20th

USD US markets will be closed on Monday for Martin Luther King Day holiday. Despite the holiday shortened week, it will be a busy week in the US on the political front as we will have Donald Trump’s presidential inauguration ceremony on Friday. The US economic calendar is well filled this week with the key data being for the December CPI Wednesday & various housing market data Thursday. There will be many senior Fed Reserve officials speaking in public forums this week including FOMC Chair Janet Yellen (Wednesday & Thursday), New York Fed President, William Dudley (permanent voter in FOMC) (Tuesday), and Minneapolis Fed President, Neel Kashkari (voter in 2017 FOMC) (Wednesday).

EUR After December’s decision to extend the bond buying programme to the end of 2017, the ECB Council is expected to adopt a waiting stance at its meeting on Thursday. At the same time, it will probably make it clear, despite recent positive data, that the Council is not planning to enter the exit phase. ECB president Draghi is likely to confirm at the press conference that the reduction of the monthly buying volume to €60bn, decided in December, is an adjustment but not an entry into the exit phase. Draghi is likely to stress again that the recovery of the economy is at risk without very expansionary monetary policy.

GBP Most of the focus will be on the latest raft of labour market figures, after data for the three months to October showed a weakening jobs market (employment fell for ) first time since Q2’15). The unemployment rate is anticipated to edge up to 4.9% in November, while the timelier claimant count is expected to rise for a fifth consecutive month in December. Meantime, average earnings growth looks set to remain subdued. UK retail sales are forecast to continue to improve in December. This backs up other data which indicate that the UK economy continued to grow at a health pace in Q4. Although, CPI inflation looks set to rise further (forecast at 1.4%) in December. Rising prices may soon begin to temper the performance of the consumer side of the economy. In terms of Brexit, a major speech on the issue by the Prime Minister, Theresa May, on Tuesday, will garner significant attention.

AUD a stronger CNY tone, along with China’s upbeat new loan data, likely supported gains in the AUD last week. This week Australia’s labour data will likely affect the AUD Thursday.

CAD market is currently pricing in unchanged policy by the Bank of Canada (BoC) at its meeting on Wednesday. Even with policy unchanged, markets expect continued policy divergence between the BoC and the Federal Reserve to drive USDCAD

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