Forex Market Outlook for the Week February 22 – 26, 2021

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In the upcoming week, the United States is set to release the second GDP estimate for the fourth quarter of last year. Other important releases include the German Ifo business climate index, New Zealand retail sales data, and Australia private capital expenditure. Further, the central bank of New Zealand is due to announce the interest rate. Having said that here outlook on a few key releases:

#1: Euro Area Germany Ifo Business Climate (02/22/2021 Monday 09:00 GMT)

In Germany, the Ifo Business Climate Index fell to the 90.1 level in January after the reading for the prior month was revised upward to the 92.2 level. The reading for the month came in below analysts’ expectations of 91.8. This is by far the lowest reading in as many as seven months. Companies expressed less optimism about current conditions and expectations. Many services were impacted by lockdown, including transport and logistics. Retail trade has collapsed. However, industries continue to be positioned well, according to Wohlrabe and Ifo economist. He also noted that the uncertainty about the economy has increased and Germany’s GDP is expected to remain unchanged in the first quarter.

Forecast for February 2021: 90.5

#2: New Zealand Retail Sales (02/22/2021 Monday 21:45 GMT)

forex market outlookIn New Zealand, retail sales jumped 28 percent on a seasonally adjusted basis in the September quarter of last year after the reading for the prior month was revised upward to a decline of 14.8 percent. The rise in retail trade in last year’s September quarter was by far the largest ever since the beginning of the series in 1995. The sharp increase in retail trade was driven by higher spending on vehicles, groceries, and major household items.

Forecast for the final quarter of 2020: -0.5 percent

#3: United States Fed Chair Jerome Powell Testifies (02/23/2021 Tuesday 15:00 GMT)

Jerome Powell, Federal Reserve Chair, is scheduled to testify before the Senate Banking Committee on the Semi-annual Monetary Policy Report. The testimony, conducted as a video conference, has two parts. In the first part, he reads out a prepared statement. This is followed by a question and answer session. As the questions are never known beforehand, the possibility of making unscripted comments is very high. This often leads to heavy market volatility.

#4: United States Conference Board Consumer Confidence (02/23/2021 Tuesday 15:00 GMT)

In the United States, the Conference Board Consumer Confidence Index edged up in January after declining in December. Currently, the index stands at the 89.3 level, up from the 87.1 level in the previous month. However, the Present Situation Index dropped from the 87.2 level to the 84.4 level. On the other hand, the Expectations Index rose to the 92.5 level from the 87.0 level in the prior period.

Forecast for February 2021: 90.2

#5: Canada BoC Governor Macklem Speaks (02/23/2021 Tuesday 17:30 GMT)

Tiff Macklem, Governor of the Bank of Canada, is scheduled to speak at the video conference organized by the Edmonton Chamber of Commerce and the Calgary Chamber of Commerce. Markets often turn volatile during his speeches as traders make an attempt to understand the direction of interest rates.

#6: New Zealand RBNZ Monetary Policy Statement (02/24/2021 Wednesday 01:00 GMT)

Released quarterly on a quarterly basis, the Reserve Bank of New Zealand’s Monetary Policy Statement provides valuable insights into the central bank’s view of inflation and the economic situation of the nation. The central bank also provides details as to how it proposes to achieve inflation targets and how it would formulate as well as implement the monetary policy over the next five-year period. Furthermore, the bank is mandated to specify as to how monetary policy was implemented ever since the release of the last statement.

#7: New Zealand RBNZ Rate Statement (02/24/2021 Wednesday 01:00 GMT)

The Reserve Bank of New Zealand releases the Rate Statement seven times every year. The central bank uses it as the primary tool to communicate with investors as regards the monetary policy. In addition to containing the outcome of the members’ decision on setting interest rates, it also provides commentary on the economic conditions that impacted their decision. More importantly, the statement discusses the nations’ economic outlook and provides clues on future decisions.

#8: New Zealand Official Cash Rate (02/24/2021 Wednesday 01:00 GMT)

In the meeting held on November 11 last year, the Reserve Bank of New Zealand decided to hold the official cash rate at the record low level of 0.25 percent as analysts widely expected. Policymakers had said that additional stimulus would be provided for meeting the consumer price inflation and improving the employment situation by way of a Funding for Lending Programme starting December. The FLP would reduce the banks’ funding costs as well as lower interest rates. However, policymakers maintained the large-scale asset purchase program at NZ$100 billion. Furthermore, the central bank expects that the monetary policy needs to remain stimulatory for some more time in view of the COVID-19 situation. Policymakers had also said that the central bank is prepared to provide additional support if required.

Forecast for February 2021: 0.25 percent

#9: New Zealand RBNZ Press Conference (02/24/2021 Wednesday 02:00 GMT)

The Governor of the Reserve Bank of New Zealand holds a press conference an hour after the announcement of the Official Cash Rate. The press conference lasts for about 30 minutes and has two parts. In the first part, he reads out a prepared statement. Then he answers the questions posed by the press. As the questions can lead to unscripted answers, heavy market volatility can be expected.

#10: United States Fed Chair Powell Testifies (02/24/2021 Wednesday 15:00 GMT)

Jerome Powell, Federal Reserve Chair, is scheduled to testify before the House Financial Services Committee on the Semi-annual Monetary Policy Report. The testimony, conducted as a video conference, has two parts. In the first part, he reads out a prepared statement. This is followed by a question and answer session. As the questions are never known beforehand, the possibility of making unscripted comments is very high. This often leads to heavy market volatility.

#11: United States Crude Oil Inventories (02/24/2021 Wednesday 15:30 GMT)

In the United States, crude oil stocks dropped 7.258 million barrels during the week that ended on February 12. With this, the crude oil inventories have declined for the fourth consecutive week. Analysts had expected stocks to reduce by 2.429 million barrels. On the other hand, gasoline inventories increased 0.672 million barrels against analysts’ expectations for a gain of 1.397 million barrels.

#12: New Zealand Final ANZ Business Confidence (02/25/2021 Thursday 00:00 GMT)

In New Zealand, the ANZ Business Confidence Index jumped to the 9.4 level in December last year, as per the preliminary estimates, from the previous month’s final reading of -6.9. This is by far the first positive reading ever since August 2017 amid the prospect of travel bubbles, encouraging vaccine-related news, and continued fiscal and monetary support. Indexes related to activity outlook, export intentions, and investment intentions soared. Profit expectations index, employment intentions index, and capacity utilization index accelerated. Pricing intentions index and inflation expectations index also registered increases. Among sectors, both commercial construction and residential indexes recorded growth.

#13: Australia Private Capital Expenditure (02/25/2021 Thursday 12:30 GMT)

In Australia, the private capital expenditure declined 3.0 percent on a quarter-on-quarter basis in the September quarter of last year. With this, private capital expenditure has dropped for the seventh straight quarter. The reading for the prior quarter was revised to a decline of 7.1 percent. Analysts had expected private sector capital expenditure to decrease by 1.5 percent. Spending dropped at a slower rate for structures and buildings; and plant, equipment, and machinery. On a year-on-year basis, Australia’s private capital expenditure plunged 13.8 percent.

Forecast for the final quarter of 2020: 0.6 percent

#14: United States Preliminary GDP (02/25/2021 Thursday 13:30 GMT)

The American economy grew an annualized 4.0 percent in the last quarter of 2020, slowing down from the record 33.4 percent expansion in the third quarter as the continued increase in COVID-19 infections and activity restrictions moderated consumer spending. The reading for the quarter was in line with analysts’ expectations. Both housing and business investment remained robust. Exports increased at a double-digit rate, but personal consumption slowed down and public expenditure declined. For the full year 2020, America’s GDP contracted 3.5 percent, registering the worst performance ever since 1946. The annual GDP growth rate came in slightly less than analysts’ expectations for a 3.6 percent drop. In the previous year, the economy had registered a growth of 2.2 percent. However, the outlook for this year is brighter than what was expected a few months ago because of the starting of the vaccination rollout even though it is progressing at a rate that is slower than expected. The new Biden administration has unveiled a $1.9 trillion stimulus plan but doubts remain whether Congress will pass the bill and how long it will take for the American people to start receiving payments.

Forecast for the second estimate for the fourth quarter of 2020: 4.1 percent

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