FX Week Ahead: Final GDP releases; US, UK and Canada

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Final GDP releases

The week ahead will see a somewhat slower pace of economic data released accentuated by a short trading week. Most of the markets, including the U.S. and Europe will be closed on Friday on account of the Good Friday holiday.

After a busy last week, which saw the Fed hiking interest rates and monetary policy meetings from the Bank of England and the Reserve Bank of New Zealand the week ahead is slower in comparison.

Final GDP releases form the major theme amid a lack of any other key economic events scheduled over the week. The U.S. and the UK will be reporting on the final revised GDP estimates for the fourth quarter of 2017. No big changes are expected although the U.S. economy is expected to see a revised GDP estimate of 2.7% for the quarter ending 2017. No changes are expected from the UK.

Canada will be releasing the monthly GDP numbers which covers the economic activity for the month of January. Besides the few economic reports coming out this week, the major theme will be the developments from Washington. Following Trump’s previous announcement of levying import tariffs on steel and aluminum, Trump followed up last week by slapping China with tariffs of up to $60 billion citing previous attempts by China to steal intellectual property rights from American companies.

However, Trump himself was seen to be taking a calculated move, unsure of what the new measures could unleash. Concerns of a global trade war increased but China responded by imposing tariffs of just $3 billion on imports of some specific goods from the U.S. China called for restraint, asking for a dialogue with Washington.

This is expected to play out in the background over the week ahead and could potentially keep the market risk sentiment in check.

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

U.S. Final Revised GDP, Core PCE

We could expect to see some volatility from the U.S. dollar with the week ahead marked by Fed speeches and includes some economic data that the Fed will be closely monitoring.

Starting off on Monday, the Fed member speech lineup includes Dudley, Mester and Quarles. Expect to see some hawkish comments especially from Loretta Mester who could make the case for a faster pace of rate hikes. Later in the week, other speeches include that from FOMC member Bostic.

On the economic front, the fourth quarter GDP data is expected to show that the U.S. economy advanced 2.7% for the quarter ending December 2017. This marks a modest revision from the previous estimates that showed the U.S. economy expanded at a pace of 2.5%. An uptick in the GDP especially for the fourth quarter is unlikely to make a big impact on the markets. With the first quarter of 2018 almost coming to an end, investors will be focused on how the U.S. economy performed in the latest quarter.

Other key data over the week includes the core PCE price index and personal income and spending data. The core PCE price index, which is a closely watched gauge of inflation by the Federal Reserve is forecast to rise 0.2%. This marks a slower pace of increase compared to the 0.3% increase registered the month before.

Personal income is expected to remain steady, rising at a pace of 0.4% while spending data is forecast to show a steady print of 0.2%.

UK Final GDP to confirm 0.4% growth

The UK’s Office for National Statistics will be releasing the final revised estimates for the fourth quarter of 2017. Economists expect to see no changes to the GDP which is expected to be confirmed at 0.4%. The UK’s economy was seen rising slightly in the fourth quarter, accelerating from 0.3% from the third quarter.

However, the fact that both the EU and the UK managed to agree to a transitory deal that would allow for an orderly exit from the Eurozone has brought some calm for investors. With last week’s data showing inflation cooling while wage growth rising has brought positive sentiment for the UK markets.

Investors will be looking forward to further economic data as the Bank of England confirmed at last week’s meeting about its intentions to hike interest rates when it meets in the month of May.

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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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