FX Week Ahead: FOMC, Eurozone GDP and nonfarm payrolls

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The markets will be looking towards a busy week ahead as the end of month flash data will dominate the headlines. Alongside the busy week the FOMC meeting will be held on Wednesday. This will be one of the final FOMC meetings that will be chaired by the Fed Chair, Janet Yellen.

Most of the data will be surrounding the U.S. economy as important indicators that will be released include the core PCE data that is due on Monday. On Thursday and Friday, the ISM’s manufacturing PMI and the nonfarm payrolls report for the month of January will set the pace for the economy in the first month of the year.

Australia will be releasing its quarterly inflation data while Canadian GDP numbers are also scheduled. From the Eurozone, focus will be on the flash inflation reports and the preliminary GDP data for the fourth quarter of 2017.

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

 

Busy week for the U.S. dollar

Both macro-economic data and the political themes will continue to keep the volatility alive in the U.S. dollar this week. The week kicks off with the Core PCE Index, a closely watched guage of consumer prices by the Fed. Core PCE index is expected to nudge higher rising 0.2% on the month, up from 0.1% registered previously. On an annual basis, core PCE is expected to rise 1.6%, a slight improvement from 1.5% registered previously.

Wednesday will be a busy day for the USD as the day starts off with the ADP employment change. Expectations call for a headline print of 185k for the month of January 2018. Later in the day, pending home sales will keep the news wires busy which will culminate with the Fed interest rate decision and the FOMC statement.

No changes are expected from the Fed this week’s meeting which also happens to be the last FOMC meeting that will be chaired by Janet Yellen. The Fed funds rates are expected to remain steady at < 1.50%.

Thursday marks a new trading month and it brings with it fresh economic data. The ISM manufacturing PMI will be the main data point of interest. Economists forecast a modest dip in the PMI to 58.9, down from 59.7 in December.

Friday will of course shift focus to the nonfarm payrolls for January. Estimates point to 175k jobs being added for January. The U.S. unemployment rate is expected to stay put at 4.1% while average hourly earnings are expected to maintain the momentum, rising 0.3% for January. This would mark the same pace of increase as it did during the previous month.

The week ahead will also see a speech by U.S. President Trump which as always could hold unexpected surprises.

 

Eurozone: GDP and inflation in focus

Following last week’s ECB meeting which saw no changes to interest rates or the ECB’s asset purchase program (APP), traders will turn focus to the flash GDP and inflation estimates.

The preliminary GDP data for the fourth quarter of 2017 will be released on Tuesday. According to the economists polled, the Eurozone GDP is forecast to rise at a pace of 0.6% on the quarter ending December 2017. In the third quarter, the Eurozone GDP was seen expanding at a pace of 0.7% revised.

On an annual basis, the Eurozone GDP is expected to rise 2.7% for the year ending 2017. In the previous quarter, the economy was seen expanding at a rate of 2.8%.

Inflation data that is due to come out on Wednesday will be another data point to watch out for.

 

Other noteworthy events this week

  • Australia CPI (q/q) – 31/01/2018
  • Canada GDP (m/m) – 31/01/2018
  • UK manufacturing PMI – 01/02/2018
  • UK construction PMI – 02/02/2018

 

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