Weekly Forex Forecast: 26th to 30th January
ECB QE is here! With Mario Draghi announcing over a €1 trillion in QE purchases from March through September 2016, EURUSD was considerably weaker this week while European indices rallied on the new stimulus package. The US dollar was the strongest against most of its peers, as a flight to safety, marked by the Japanese Yen coming in second. The surprise rate cut from Canada dragged down the Aussie and Kiwi dollars as well.
Figure 1: Weekly Spot FX Performance – 19/01/2015 (Source: Finviz.com)
The markets are widely expecting to see a major announcement from Mario Draghi on the proposed Quantitative Easing plan, which is likely to the European currencies subdued in the run up to the event. Most importantly, the Greek election results are likely to further fuel volatility over the next week.
Fundamentals for the Week 26 – 30 Jan
|26 January||BoJ monetary policy minutes||–|
|German Ifo business climate||106.7|
|BBA Mortgage approvals||36.6k|
|Australia Bank holiday|
|27 January||UK Preliminary GDP q/q||0.6%|
|US Core durable goods orders m/m||0.6%|
|S&P/CS HPI y/y||4.7%|
|US Flash services PMI||53.9|
|CB Consumer confidence||95.7|
|New Home sales||452k|
|Richmond manufacturing index||6|
|28 January||Australia CPI q/q||0.3%|
|Eurozone Gfk consumer climate||9.2|
|German import prices m/m||-1.4%|
|RBNZ Overnight cash rate||3.5%|
|29 January||Japan retail sales y/y||1.1%|
|Australia import prices q/q||1.5%|
|German preliminary CPI m/m||-0.8%|
|Weekly unemployment claims||301k|
|US Pending home sales m/m||0.6%|
|30 January||Tokyo Core CPI y/y||2.2%|
|National Core CPI y/y||2.6%|
|Japan unemployment rate||3.5%|
|Japan prelim industrial production m/m||1.3%|
|UK Gk consumer confidence||-2|
|Australia PPI q/q||0.3%|
|Australia private sector credit m/m||0.5%|
|German retail sales m/m||0.4%|
|Spanish CPI y/y||-1.5%|
|Spanish GDP q/q||0.5%|
|Eurozone CPI flash estimate y/y||-0.5%|
|Eurozone Core CPI flash estimate y/y||0.6%|
|Eurozone unemployment rate m/m||11.5%|
|Canada GDP m/m||-0.1%|
|US Advance GDP q/q||3.1%|
|UoM consumer sentiment||98.5|
|UoM inflation expectations||2.4%|
Currencies/Events to Watch this Week
Euro: With the anti-austerity party, Syriza winning the snap elections in Greece over the weekend, focus will yet again turn to the Euro as the party and the Troika is likely to sit through many rounds of negotiations to restructure or even write off some of its debt.
US Dollar: After taking a back seat last week, the US Dollar has some key risk events. The FOMC statement is likely to bring some volatility, however considering that there is no press conference follow up by the Fed, the statement is likely to mirror the previous month’s statement without too much of deviation. The 4th quarter advanced GDP estimates is also likely to weigh in on the Greenback as expectations are to a slower growth of 3.1%
British Pound: The Sterling is likely to react to the preliminary GDP estimates for the 4th quarter of 2014, which is currently tipped to slow to 0.6% from 0.7% during the third quarter. Any upside surprises to the GDP reading could possibly help push the GBP pairs higher, especially against the Greenback.
Yen: With the exception of the meeting minutes on Monday, there are no major events, which could likely see the Yen continue to remain as a safe haven currency this week in view of the US FOMC statement.
Kiwi Dollar: The RBNZ will be holding its monthly monetary policy review this week although expectations are for the Central bank to leave interest rates unchanged in view of weaker inflation reading last week. Expect BNZ Governor Wheeler to attempt to talk down the Kiwi, which has in fact weakened considerably since late last week.
FX Majors Weekly Pivots