FX Week Ahead: Italian elections, U.S. revised GDP

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Italian elections and US revised GDP

The week ahead will be marked with investors turning their attention to the Italian elections and US revised GDP. Although the risks are limited as far as the euro currency is concerned, any surprise results could indeed bring volatility to the markets. On the economic front, data this week will focus on the revised GDP estimates from the U.S. With the start of a new trading week, indicators covering the key sectors will be released.

In the UK, PMI’s from Markit will show how the construction and manufacturing sectors have fared.

Data from the Eurozone is limited to the flash inflation estimates for the month of February. Consumer prices are expected to remain broadly stable from January’s inflation figures. However, as far as the euro currency is concerned, the Italian elections will likely over shadow any economic data during the week.

Here’s a quick recap of the key economic events due this week.


U.S: Durable goods orders, GDP and PMI’s

The start of a new trading week brings fresh economic data from the U.S. covering the period of February. As per initial estimates from various GDP trackers, the U.S. economy is expected to have started the year on a strong note.

This could be likely reflected from the fact that the figures for February remain around the same levels of activity as in the previous month. Starting the week, the U.S. durable goods orders will be coming out on Tuesday. The data will cover the period of January. Previously, durable goods orders were seen rising at the strongest levels in six months and December’s data reversed the declines posted in the previous month.

Later in the week, the second revised GDP estimates from the U.S. will be released. Economists forecast no change to the GDP data which is expected to confirm that the U.S. economy advanced at a pace of 2.6% for the quarter ending December 2017. Although a bit slower pace of expansion compared to the previous quarter, the markets expect to see growth picking up in the first quarter of the year. A beat on the estimates could potentially push rate hike expectations even further.

The week concludes with the PMI figures from the Institute of Supply Management. Economists forecast that the PMI might have eased to 58.6 in February, compared to 59.1 in January.


UK Manufacturing and construction PMI

Data from the UK for the week ahead will see investors focusing on the manufacturing and services PMI numbers that are due later in the week. Following last week’s downward revision to the fourth quarter GDP which saw the economy rising at a pace of 0.4% instead of 0.5%, the monthly PMI’s for February will shape expectations on how the UK’s economy performed in the second month of the year

Economists are forecasting that activity in the manufacturing sector might have pushed the manufacturing PMI to 55.2, broadly unchanged from 55.3 that was registered the month before. Manufacturing activity in the UK was seen edging lower since January after the index peaked to 58.2 in November last year.

Activity in the construction sector will gain more attention as data for January showed that the construction sector barely managed to stay above the key 50-level in the index. A slowdown by means of a reading below 50.2 from January could potentially signal a contraction in the sector.

With the Bank of England preparing the markets for a rate hike in the coming months, economic data from the UK has remained mixed. Last week’s unemployment report showed that the UK’s unemployment rate increased to 4.4% for the first time in a decade.

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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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