Forex Market Outlook For The Week March 20 – 24, 2017

Last week, the Federal Reserve decided to go ahead with an increase in its benchmark interest rate by 0.25 percentage point to 1.0 percent. With this, the Fed has increased the interest rate three times since the global financial crisis. The interest rate hike was widely expected by the market because of February’s strong jobs report and Yellen’s comments that an increase was now due. However, the Fed did not change its economic outlook. As a result, the U.S. dollar collapsed. Meanwhile, in the Netherlands, the extreme-right could not make it to the top. This helped the euro. Further, the Bank of England’s hawkish tilt boosted the British pound a great deal.

The US dollar lost ground because of the Fed’s dovish interest rate hike. The question now is whether the downfall would continue or not. Some of the key economic data slated for release this week include the UK inflation data, New Zealand interest rate decision, and the U.S. durable goods orders. Here is an outlook on the key events for the week:

forex market outlook#1: Australia Monetary Policy Meeting Minutes (03/20/2017 Monday 13:30 GMT)

The Reserve Bank of Australia releases the minutes of the monetary policy meeting two weeks after the announcement of the Cash Rate. It provides a detailed account of the most recent meeting of the central bank’s board. It also includes an in-depth account as regards the economic conditions that led to the board’s decision on setting the interest rates.

#2: U.K. CPI Tuesday (03/21/2017 Tuesday 9:30 GT)

Consumer prices index rose in the month of January at a pace that was the fastest since June 2014 because of higher global oil prices and weakening of the GBP. The index edged up 1.8 percent on year-on-year basis, but came in slightly below the market forecast for a 1.9 percent annual increase. The Bank of England expects inflation to rise above the 2.7 percent level in about a year time because of an increase in import prices caused by the decision to leave the European Union. In the month of February, it is expected that the CPI will rise further to 2.1 percent on year-over-year basis.

#3: New Zealand GDT Price Index (03/21/2017 Tuesday 12:00 GMT)

In the auction held on March 7, 2016, dairy prices fell sharply as expected. The GDT price index dropped by 6.3 percent to US$3,512 from the auction two weeks ago. About 22,328 tons of products were sold at the auction. Sales rose from that of 20,479 tons recorded at the previous auction. The price of whole milk powder fell by 12.4 percent to US$2,782 per ton.

#4: Canada Core Retail Sales (03/21/2017 Tuesday 13:30 GMT)

In Canada, retail sales unexpectedly fell by 0.5 percent in December 2016 after the reading for the previous month revised upward to a gain of 0.3 percent. The market had expected retails to increase by 0.1 percent. Retail sales fell for the first time in five months as motor vehicle and parts dealer sales declined 0.9 percent. Core retail sales, excluding automobiles, declined by 0.3 percent in December.

#5: U.S. Crude Oil Inventories (03/22/2017 Wednesday 14:30 GMT)

Crude oil stocks declined slightly during the last reporting period after recording increases for nine weeks. Crude stocks declined by as many as 237,000 barrels. However, oil prices remained unchanged as higher U.S. inventory levels offset a weaker dollar. Though the U.S. market will continue to focus on production growth and higher domestic inventory levels, the same is not applicable to other countries around the world. For instance, Asia continues to reel under a deficit, while the U.S. and the Atlantic Basin have surplus stocks.

#6: New Zealand Official Cash Rate (03/22/2017 Wednesday 20:00 GMT)

The Reserve Bank of New Zealand kept its Official Cash Rate unchanged at 1.75 percent in the meeting held in February in spite of continued improvement in business activity, commodity prices and a better global outlook. However, major challenges like on-going additional capacity in the global economy and an increase in geopolitical uncertainty continue to cause trouble for policymakers. The central bank in New Zealand is not expected to change the rates during the meeting of the monetary policy committee scheduled to be held this week.

#7: Reserve Bank of New Zealand Rate Statement (03/22/2017 Wednesday 20:00 GMT)

The rate statement is one of the primary tools that the Reserve Bank of New Zealand makes use of to communicate with investors as regards the monetary policy. It provides the outcome of the monetary policy committee members’ decision on interest rate and commentary as regards the economic conditions that led to the decision. More importantly, it indicates the economic outlook and provides clues on the direction of future decisions.

#8: U.K. Retail Sales (03/23/2017 Thursday 9:30 GMT)

In the U.K., retail sales unexpectedly fell by 0.3 percent on month-over-month basis in January after the reading for December 2016 was revised upward to a decline of 2.1 percent. The reading for January missed market expectations for a gain of 0.9 percent because of an increase in the prices of fuel and food. Forecast for February: a gain of 0.4 percent.

#8: U.S. Unemployment Claims (03/23/2017 Thursday 12:30 GMT)

The number of American people filing new claims for jobless benefits dropped to 241,000 during the week ended March 11, 2017 on a seasonally adjusted basis. The reading came in lower than a decline of 245,000 that analysts anticipated. With this, the unemployment claims have now remained below the 300,000 mark for 106 straight weeks. However, the four-week moving average of initial jobless claims increased by 750 during the week to 237,250. The U.S. employment market has been showing resilience continuously since the beginning of 2017. Unemployment is down at 4.7 percent and the jobs gain has been (235,000) in February. Wages increased by 2.8 percent in February, which indicated further firming up in the labor market. The number of new jobless claims is expected to come in at 240,000 for the next reporting period.

#9: U.S. Federal Reserve Chairperson Janet Yellen Speaks (03/23/2017 Thursday 13:45 MT)

Janet Yellen, Federal Reserve Chairperson is scheduled to deliver opening remarks at the Federal Reserve System Community Development Research Conference in Washington DC. In one of her recent speeches following the Fed’s decision to hike interest rates on March 15, she said that finally it is safe to harbor a better feeling about the U.S. economy. Further, policymakers are confident that the U.S. economy is resilient to shocks. Additionally, the rate increase indicated a vote of confidence because both the present and future conditions seem upbeat.

#10: Canada CPI (03/24/2017 Friday 12:30 GMT)

In Canada, on a seasonally adjusted basis, the consumer price index increased by 0.9 percent in January from the previous month. The rose by 2.1 percent on a year-over-year basis, following the 1.5 percent gain recorded in December. Excluding gasoline, the index rose by 1.5 percent year-on-year in the month of January after registering an increase of 1.4 percent in December 2016.

#11: U.S. Core Durable Goods Orders (03/24/2017 Friday 12:30 GMT)

In the U.S., orders for long-lasting goods rebounded in the month of January. The number of orders rose by 1.8 percent, following two months of declines. This indicated that the companies are upbeat at the beginning of the year. However, the key factor that determines business investment plans dropped by 0.4 percent. Excluding transportation, orders slipped by 0.2 percent. This is the weakest core durable goods reading since June last year, but analysts expect that business investment would strengthen during the course of this year because of a recovery in the manufacturing sector. Forecast for February: Orders for durable goods are expected to increase by 0.1 percent and that for core durable goods are estimated to go up by 0.5 percent.

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