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FX Week Ahead: Australia GDP, BoC Meeting

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The week ahead will be busy with lots of Tier I data coming out as the markets move into a new trading month. Dominating headlines will be the president Trump’s address to Congress alongside Janet Yellen’s speech that is scheduled for on Friday. Elsewhere, the Eurozone flash inflation figures will be coming up while Australia reports the GDP figures and the Bank of Canada will be meeting to decide on interest rates. Here’s a quick recap to the main events this week.

US fourth quarter GDP up for revision

The week ahead will see the fourth quarter GDP figures coming up for revision. Data during the first estimates showed that a 1.9% increase, this was significantly lower, but the second estimates are expected to rise to 2.1%. Data over the week will also include the February’s ISM manufacturing and non-manufacturing PMI figures. In January, the non-manufacturing PMI was at 56.5, which was 0.1 points lower from the month before. The manufacturing PMI was seen rising to 56.0, which was the highest on record since November 2014.

U.S. GDP, Q4 2016: 1.9%
U.S. GDP, Q4 2016: 1.9%

For February, the manufacturing PMI is expected to rise to 56.1, while the services PMI is expected to rise slightly higher to 56.6. Besides the ISM numbers, other economic data will include the durable goods orders

President Trump to address Congress. Yellen’s speech

U.S. President Donald Trump will be speaking to the Congress on Tuesday. For market participants this will likely mean rising expectations for any further indications on the potential tax reforms and infrastructure spending plans that have been long promised. The president himself had announced earlier in February that he would be giving out more details on the proposed tax reforms within a few weeks time.

However, last week, investors were a bit disappointed as the newly appointed U.S. Treasury Secretary Steven Mnuchin said that the Trump administration was working with Congress on pass the legislation before August. “That’s an ambitious timeline. It could slip to later in the year,” he said.

For the moment, the markets are merely reacting to the risks of delay in announcing the fiscal stimulus plans but this could see a further deterioration in sentiment should there be continued delay on the issue.

Besides Trump’s address to Congress, Fed Chair Janet Yellen will be speaking on Friday. The Fed Chair, Yellen is expected to speak at the Executives Club of Chicago. Her speaking engagement will be the last before the start of a black out period, meaning that any hints for a March rate hike will come this week.

Australia quarterly GDP expected to rise 0.7%

The fourth quarter GDP figures are expected to be released this week on Wednesday. Economists polled are forecasting an increase of 0.7% on a quarterly basis. This would be a positive trend considering that the Australian economy posted a contraction of 0.5% in the three months ending September and an annual growth rate of 1.8%, which was a significant decline from 3.1% annual GDP growth rate recorded in the previous quarter.

Australia Quarterly GDP: -0.5% (Q3, 2016)
Australia Quarterly GDP: -0.5% (Q3, 2016)

Following the recent set of data, the fourth quarter GDP numbers are expected to come out around 0.7% especially with the recent trends seen in the trade and construction sectors which has indicated downside risks. The 0.7% quarterly increase in GDP might positive compared to the 0.5% decline but it is still lower than initial estimates which pointed to a 1% increase. The investment outlook for Australia for the year ahead is also looking bleak although the central bank has maintained a very optimistic outlook. Non-mining investments are likely to brighten the data point.

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