FX Week Ahead: Inflation, GDP and OPEC meetings

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FX Week Ahead 27.11.17

FX Week Ahead 27.11.17

Economic data next week will be focusing on the U.S. inflation figures amid a rather slow week. Traders will also focus on the confirmation hearing for the proposed Fed Chair, Jerome Powell. His nomination is expected to pass without any surprises.

The U.S. tax reforms vote will also be held next week putting most of the focus on the U.S. dollar. Elsewhere, the OPEC meetings will also gain prominence as the members and Russia meet to decide on production cuts.

Canada and the U.S. will be reporting on the GDP numbers. The U.S. GDP is expected to be revised higher.

Here’s a quick recap into this week’s economic calendar for the currency markets.

Busy week for the U.S. dollar

Despite a relatively slow week, the U.S. dollar will see a somewhat busy week in comparison to its peers. Data this week includes both economic as well as general underlying themes. Traders will be focusing on the U.S. tax reforms plan which will be put to a vote this week. Preparations are underway for the tax reforms to be released ahead of Christmas.

President Trump’s Fed nominee, Jerome Powell will have the confirmation hearings this week. With Powell being handpicked by President Trump and with no other major front runners seen, Powell’s confirmation hearing is expected to go without any surprises. It is quite likely that Powell will be appointed the next Chairman of the Federal Reserve after the Fed Chair Janet Yellen’s term ends next year.

The Fed Chair, Janet Yellen will also testify to the Joint Economic Committee of Congress this week. However, given the transition at the Federal Reserve, Ms. Yellen’s comments are not expected to impact the markets much.

On the economic front, inflation and GDP will be the main themes this week. Consumer price index data for the month of November will be released. The Core PCE and PCE price index data will be closely watched as it is the Fed’s preferred gauge of inflation.

On a month over month basis, the core PCE price index data is expected to rise 0.2% on the month. On an annual basis, this is expected to put the core PCE index at 1.4%. Although this is still below the Fed’s 2% inflation target rate the increase in inflation is likely to boost the U.S. dollar. The second revised GDP estimates for the third quarter will also be released this week.

According to the economists polled, the revised GDP is expected to show an increase of 3.2% on the quarter. This is higher than the 3.0% increase seen in the preliminary GDP release. On Friday, the ISM manufacturing PMI numbers will be coming out. Manufacturing activity is expected to pullback slightly but overall it is expected to remain strong.

OPEC and Russia convene in Vienna this week

Volatility in oil prices picked up as the markets move closer to this week’s OPEC meeting to be held in Vienna, Austria. According to reports last week, Russia is said to prefer the production cuts being extended to the end of 2018. Although no major deal has been reached yet, the OPEC and Russia are quite likely expected to extend the production cuts.

Reports from Bloomberg suggest that Moscow and Riyadh are all set to make the announcement on November 30th in Vienna. According to the report, Russia is expected to include new language that will link the size of the production cuts to the health of the oil markets.

Ahead of the OPEC meeting, several members of the oil cartel have sounded positive with the current oil prices. Venezuela’s oil minister said that the oil markets found the balance as inventories begin to decline.

WTI crude oil prices were seen breaking past the technical resistance level of $57.87 last week.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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