Forex Market Outlook for the Week February 15 – 19, 2021

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In the upcoming week, the US Fed and RBA are scheduled to release the minutes of their most recent monetary policy meetings. Additionally, flash PMI survey results for the UK, France, and Germany are also set to be announced, providing a deeper insight into the state of economies around the world. Other important announcements include the US retail trade data, the UK retail sales figures, and Australia’s employment change information. Finally, investors will also be monitoring the progress with respect to the US fiscal stimulus. Having said that here is an outlook a few key releases:

Australia Monetary Policy Meeting Minutes 02/16/2021 Tuesday 00:30 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 Reserve Bank Board. In addition, it provides in-depth insights into the economic conditions that impacted their decision as regards setting interest rates. If the minutes project a more hawkish tone, then it is good for the Australian currency.

United States Core Retail Sales (02/17/2021 Wednesday 13:30 GMT)

In the United Sales, core retail sales, which exclude autos, fell 1.4 percent on a month-on-month basis in December last year after the reading for the prior month was revised to a 1.3 percent decline. Analysts had expected a 0.1 percent drop in retail sales in December.

Forecast for January 2021: Core retail trade expected to rise by 0.9 percent

United States Retail Sales (02/17/2021 Wednesday 13:30 GMT)

forex market outlookIn the United States, retail sales fell 0.7 percent on a month-on-month basis in December last year after the reading for the prior month was revised to a decline of 1.4 percent. Analysts had expected December’s reading to come in flat. With this, retail trade in America has declined for the third consecutive month amid high unemployment levels, record COVID-19 infections, and lack of support on the part of the government. Sales dropped at electronics and appliance stores; restaurants and bars; food and beverage stores; general merchandise stores; sporting goods, hobby, books stores, and musical instrument stores; and furniture stores. Additionally, online sales fell 5.8 percent, accelerating from the 1.6 percent decline in the prior month.

Forecast for January 2021: Retail trade expected to increase 1.1 percent

United States FOMC Meeting Minutes (02/17/2021 Wednesday 19:00 GMT)

The Federal Reserve releases the minutes of its most recent meeting three weeks after the announcement of the Federal Funds Rate. It provides a detailed account of the meeting and offers in-depth insights into the financial and economic conditions that impacted the members’ vote as regards setting the interest rates. If the tome of the minutes is more hawkish than expected, it is good for the greenback.

Australia Employment Change (02/18/2021 Thursday 00:30 GMT)

In Australia, employment increased by 50,000 in December last year from the previous month. The reading for the month matched with analysts’ expectations, reflecting a broad-based recovery in the labor market. While 35,700 full-time jobs were added, part-time employment rose 14,300.

Forecast for January 2021: Australia expected to add 30,200 jobs

Australia Unemployment Rate (02/18/2021 Thursday 00:30 GMT)

On a seasonally adjusted basis, the unemployment rate in Australia fell to the 6.6 percent level in December from the 6.8 percent level a month earlier. Further, the jobless rate came in below analysts’ expectations of 6.7 percent. This is by far the lowest unemployment rate ever since April last year as the country gradually emerged from the coronavirus scare. The number of jobless people in Australia declined 30,100 to 912,000. While those looking for full-time work dropped by 14,300 to 658,700, those that wanted part-time work only dropped by 15,800 to 253,300. The participation rate rose to a 16-month high figure of 66.2 percent in December from the 66.1 percent level in November. This was very much in line with analysts’ expectations. While the underemployment rate declined 0.8 points to 8.5 percent, the underutilization rate dropped by 1.1 points to the 15.1 percent level. Hours worked in all jobs in December rose 2 million hours or 0.1 percent to 1,753 million hours.

Forecast for January 2021: 6.5 percent

United States Unemployment Claims (02/18/2021 Thursday 13:30 GMT)

The number of American people filing for jobless benefits dropped to 793,000 during the week that ended on February 6 from the prior week’s revised reading of 812,000. Analysts had expected 757,000 Americans to file for jobless benefits. This is the lowest number of claims filed in as many as four weeks. However, it is still on the higher side because of a slowdown in the recovery of labor market recovery amid the non-availability of any financial support from the government. On a non-seasonally adjusted basis, the claims filed dropped to 813,000 from 850,000 in the previous week. Further, approximately 335,000 applied for support under the Pandemic Unemployment Assistance Scheme, down from 369,000 in the prior period.

Forecast for the week ending February 13: 760,000

United Kingdom Retail Sales (02/19/2021 Friday 07:00 GMT)

In the United Kingdom, retail sales rose by 0.3 percent on a month-on-month basis in December after the reading for the prior month was revised upward to a fall of 4.1 percent. However, the increase in retail trade was well below analysts’ expectations for an increase of 1.2 percent. Still, retail trade was 2.7 percent higher compared to the pre-COVID levels in February as stores reopened following the lockdown in November. Purchase of clothing soared as much as 21.5 percent. For the full year 2020, retail trade shrank a record 1.9 percent. The biggest declines were registered by clothing stores, fuel stores, and department stores. The strongest increases were reported by non-store retailers, online retailers, and food stores.

Forecast for 202: 2.6 percent

Euro Area France Flash Services PMI (02/19/2021 Friday 08:15 GMT)

In France, the Services PMI reported by IHS Markit was revised slightly upwards to 47.3 in January this year from the preliminary reading of 46.5. In December, the index stood at 49.1. The reading for the month pointed towards contraction of activity in the services sector, that too for the 5th consecutive month. Tighter COVID-19-related restrictions impacted demand. The sector that was most severely affected was restaurants and hotels because of forced temporary closures. Exports and new orders continued to drop, while businesses hired more workers for the first time ever since February 2020. Further, input costs rose at the fastest rate in five months. Finally, businesses expressed optimism as regards future output even though the degree of positivity softened from the 20-month high level recorded in December last year.

Forecast for February 2021: 47.0

Euro Area Germany Flash Manufacturing PMI (02/19/2021 Friday 08:30 GMT)

In Germany, the Manufacturing PMI reported by IHS Markit/BME was revised slightly upward to 57.1 in January from the preliminary estimate of 57. However, the reading for the month came in below the reading of 58.3 for December last year. The reading still pointed towards strong growth in manufacturing activity amid further gains in new orders and output. The rate of shedding jobs by firms slowed down as goods manufacturers reported a high level of optimism towards the future activity. However, the incidences of supply chain bottlenecks continued to grow and contributed to the occurrence of input shortages. Further, the lack of availability of shipping containers led to an increase in input cost inflation and a reduction of inventories at manufacturers. The degree of optimism expressed by manufacturers as regards production levels for the year ahead strengthened to a record high in January. Many firms expressed hope of a further recovery in client investment and demand once the COVID-19 vaccine rollout picks up momentum.

Euro Area Germany Flash Services PMI (02/19/2021 Friday 08:30 GMT)

In Germany, the Services PMI reported by IHS Markit was revised downward to 46.7 in January from the preliminary estimate of 46.8. The index stood at the 47.0 level in the prior month. The reading pointed towards the fourth consecutive month of a fall in services activity as the authorities continued to tighten lockdown measures to contain the rate of spread of the coronavirus. The worst-performing sectors were those that were impacted by temporary closures. These sectors included hotels and restaurants, renting and business services, and financial intermediation services. However, hopes related to the rollout of vaccines helped service providers become more optimistic as regards the outlook for the year ahead as employment also increased during the month.

Forecast for February 2021: 46.5

United Kingdom Flash Services PMI (02/19/2021 Friday 09:30 GMT)

In the United Kingdom, the Services PMI reported by IHS Markit/CIPS was revised upward to the 39.5 level in January from the preliminary estimate of 38.8. In the previous year, the index stood at the 49.4 level. However, the reading still pointed towards the sharpest contraction of activity in the services sector ever since May last year due to the restrictions imposed on trade and closure of businesses temporarily during the third national lockdown. In spite of a sharp decline in client demand because of the pandemic, businesses expressed optimism for the third month in a row. Further, the optimism was at the strongest level ever since May 2014 as the country has successfully rolled out vaccines so far in 2021. Further, the hopes of a strong rebound in the nation’s economic conditions as the pandemic situation improves are also very high.

Forecast for February 2021: 42.3

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