Forex Market Outlook For The Week February 24 – 28, 2020

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The third week of February ended on an anxious note after the optimism in the prior week, when the investors lauded a deceleration in new coronavirus cases. Optimism that its impact is reducing is still there, but corporate announcements are spooking investors. In the upcoming week, there is not much on the economic calendar to enthuse the markets. The impact of the coronavirus on global economies is likely to be the primary aspect that would drive risk sentiment. However, there are a few important indicators worth watching. Overall, it is difficult to suggest if the U.S. dollar’s relentless rally is likely to end, as the largest economy in the world is in a much better position, compared to that of its rivals, to weather a China slowdown.

#1: New Zealand Retail Sales (02/23/2020 Sunday 21:45 GMT)

forex market outlookIn New Zealand, the volume of retail trade in total rose by 1.6 percent in the September quarter of last year, following a 0.2 percent increase in the prior period. The retail sales reading for last year’s third-quarter beat analysts’ expectations for a gain of 1.2 percent. This was the largest jump in retail sales ever since the fourth quarter of 2018 and was driven by the increase in the sales of electrical and electronic goods. The increase in sales of these goods was attributed to the promotion of big-screen television sets prior to the Rugby World Cup that was held towards the end of September last year in Japan. Significant increases in sales were recorded for floor coverings, furniture, and houseware and textiles; recreational goods; and pharmaceutical and other store-based retailing outlets. On the other hand, accommodation sales dropped 1.4 percent after the 1.6 percent rise in the second quarter of last year. Specialized food sales declined by 1.3 percent. On a yearly basis, retail trade jumped 4.5 percent, following the 2.9 percent expansion in the prior period.

Forecast for the fourth quarter of 2019: 0.8 percent

#2: Germany Ifo Business Climate (02/24/2020 Monday 09:00 GMT)

In Germany, the Ifo Business Climate Index dropped to the 95.9 level in January from the 96.3 level reported in the prior month. The reading of the index for January missed analysts’ expectations of 97. While the sub-index business expectations fell to the 92.9 level from the 93.9 level in December, the current conditions gauge rose to the 99.1 level from the 98.8 level in December last year. Among sectors, service-providers and construction contractors reported deterioration in sentiment. However, traders and manufacturers reported an improvement in business sentiment.

Forecast for February 2020: 95.0

#3: United States Conference Board Consumer Confidence (02/25/2020 Tuesday 15:00 GMT)

In the United States, the Consumer Confidence Index reported by the Conference Board rose in January after registering a moderate increase in December last year. The Index rose to the 131.6 level from the 128.2 level in the prior month. While the Present Situation Index increased to the 175.3 level from the 170.5 level, the Expectations Index came in at the 102.5 level, up from the 100.0 level.

Forecast for February 2020: 132.6

#4: New Zealand ANZ Business Confidence (02/27/2020 Thursday 00:00 GMT)

In New Zealand, the Business Confidence Index reported by ANZ rose to the -13.2 level in December last year from the -26.4 level in November 2019 and matched analysts’ expectations of -13.6. This was the highest reading ever since October 2017 and improvement in sentiment was driven by the manufacturing sector. As far as the components are concerned, exports, activity outlook, and employment reported improvement in sentiment. Among sectors, business confidence in the commercial construction sector increased, but the residential construction reported a decline.

#5: Australia Private Capital Expenditure (02/27/2020 Thursday 00:30 GMT)

In Australia, private capital expenditure declined by 0.2 percent on a quarter-on-quarter basis in the third quarter of last year after the reading for the prior period was revised upward revised to a drop of 0.6 percent. Analysts had expected a 0.1 percent decrease in private capital expenditure. With this, private capital expenditure in Australia has declined for the third consecutive quarter. The drop in private investments was mainly because of a reduction in capital expenditure for plant, equipment, and machinery. On the other hand, building and structure investments rebounded. Over the year to the September quarter, private capital expenditure decreased by 1.3 percent.

Forecast for the fourth quarter of 2019: 0.5 percent

#6: Canada GDP (02/28/2020 Friday 13:30 GMT)

Canada’s GDP grew by 0.1 percent on a month-over-month basis in November last year after the 0.1 percent contraction in the prior month. The GDP growth figure for the month beat analysts’ expectations for a flat reading. The goods-producing industries reported a growth of 0.1 percent after two consecutive months of contraction, driven by the construction sector and an increase in the consumption of utilities because of cold weather conditions in central Canada. The growth in manufacturing output remained flat. On the other hand, agriculture, forestry, fishing, and hunting; and mining and quarrying sectors reported a decline in growth. Services-producing industries registered a 0.1 percent growth, driven by retail trade; accommodation and food services; real estate, rental, and leasing; educational services; health care and social assistance; and professional, scientific, and technical services. However, transportation and warehousing sectors reported a drop in growth partly because of rail transportation service disruptions.

Forecast for December 2019: 0.1 percent

#7: China Manufacturing PMI (02/29/2020 Saturday 01:00 GMT)

In China, the official Manufacturing PMI reported by the NBS declined to the 50.0 level in January from the 50.2 level in the prior month. The reading for the month was in line with analysts’ estimates. This was by far the weakest reading ever since October last year. It represented a neutral mark with respect to growth and contraction as the survey was carried out prior to the outbreak of coronavirus. Output growth slowed to the lowest level in three months and export orders fell back into the contraction territory. Further, factories continued to retrench workers, but at a slower pace. Meanwhile, new orders increased for the third consecutive month and at the fastest rate ever since April 2019. Buying levels rose further. Input cost inflation increased significantly, but selling prices continued to drop. Finally, sentiment rose sharply.

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