FX Week Ahead: Full Steam Ahead

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After the holidays and end of year break, the markets will be going full steam ahead, with lots of important economic releases lined up for the first trading week of the year. Of course, most of the economic data will be focusing on the U.S. dollar.

The week starts off with the PMI figures from the UK that cover manufacturing, services and construction sectors. The data will be for the month of December and will probably give more insight into how the UK’s GDP might have fared during the last quarter 2017.

From the U.S. the ISM’s manufacturing and non-manufacturing PMI figures come out during in the week. This is later followed by the ADP private payrolls data which ends with Friday’s non-farm payrolls. The data is unlikely to impact the markets much although further improvement in the labor conditions will see traders raising the odds of another rate hike by the end of the first quarter. Wage growth of course remains the key talking point on the jobs report.

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

 

Busy week for the U.S. dollar

A very busy week for the U.S. dollar is on the horizon this week as economic details gather pace. The week starts off on Wednesday which will see the release of the ISM’s manufacturing PMI report. Economists expect no change to the manufacturing activity as the index is expected to remain steady at 58.2 for the month of December.

Later in the day, construction spending activity is expected to show a 0.7% increase, half the pace as seen in the previous month. Wednesday will also see the release of the FOMC meeting minutes. The minutes cover the period from December where the central bank was seen hiking interest rates by 25 basis points.

On Thursday, the ADP private payroll numbers is expected to show no major changes as the private sector hiring is expected to rise 190k, the same pace as the previous month. The ADP payrolls will set the stage for the December payrolls report that will be released by the Bureau of Labor statistics on Friday.

Estimates show that the U.S. economy might have added 188k jobs during the month of December. This is weaker than the 228k print seen in the month of November.

The unemployment rate is expected to remain steady at 4.1% while forecasts show a modest increase of 0.3% on a month over month basis for the average hourly earnings. The ISM’s non-manufacturing PMI report will be coming out later and is expected to show an increase to 57.6 for December which is slightly higher from November’s 57.4.

 

UK PMI’s in focus

Economic data from the UK this week will focus on forward looking indicators. Markit will be releasing the PMI numbers covering manufacturing, construction and services sectors.

According to the estimates, manufacturing activity is expected to ease to 57.9 following November’s increase to 58.2. On Wednesday, the construction PMI data is expected to show a steady hand as economists forecast the index to remain steady at 53.1

The services PMI data which is due on Thursday is expected to recover to 54.1 after the index fell to 53.8 in November surprisingly. Services activity is considered to be one of the biggest contributors to the UK’s GDP report. Other economic details from the UK include the M4 money supply data and Nationwide’s housing price index data.

 

Eurozone flash inflation estimates for December

Although it is a quiet week for the Eurozone, data on Friday will focus on the flash inflation estimates for the month of December. Economists are forecasting that the Eurozone’s headline inflation rose at a slower pace of 1.4% compared to the same time last year. Core inflation is estimated to have increased from 0.9% to 1.0%.

The inflation estimates will be followed by the producer prices index data for November. Headline PPI is expected to remain steady at 2.5% on a year over year basis.

 

 

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