Forex Market Outlook for the Week January 25 – 29, 2021

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In the upcoming week, a host of data from the US are scheduled to be released. They include the advance GDP growth figures for the final quarter of 2020 and the Fed’s monetary policy decision. On the corporate earnings front, Apple, Microsoft, Tesla, and Facebook are set to announce quarterly financial results. Meanwhile, investors are likely to continue their focus on the coronavirus pandemic and carefully watch President Biden’s legislative agenda. Having said that here is an outlook on a few important releases:

#1: Euro Area ECB President Christine Lagarde Speaks (01/25/2021 Monday 08:45 GMT)

Christine Lagarde, President of the European Central Bank, is scheduled to participate and speak in a virtual event hosted by the Institute for Law and Finance. Markets often turn volatile during her speeches as traders make an attempt to understand the direction of interest rates in the future.

#2: Euro Area ECB President Christine Lagarde Speaks (01/25/2021 Monday 16:15 GMT)

Christine Lagarde, President of the European Central Bank, is scheduled to participate in a panel discussion on “Restoring Economic Growth” at Davos via video conference. Markets often turn volatile during her speeches as traders make an attempt to understand the direction of interest rates in the future.

#3: United States CB Consumer Confidence (01/26/2021 Tuesday 15:00 GMT)

In the United States, the Conference Board Consumer Confidence Index continued to decline in December, following the decrease in November. The Index is now at the 88.6 level, down from the 92.9 level in the previous month. The Present Situation Index fell sharply to the 90.3 level from the 105.9 level. But, the Expectations Index rose to the 87.5 level from the 84.3 level.

Forecast for January 2021: 88.9

#4: Australia CPI (01/26/2021 Tuesday 00:30 GMT)

In Australia, consumer prices increased 1.60 percent on a quarter-on-quarter basis in the third quarter of last year.

Forecast for the final quarter of 2020: 0.7 percent increase expected

#5: Australia Trimmed Mean CPI (01/26/2021 Tuesday 00:30 GMT)

In Australia, the trimmed mean or core consumer prices rose 0.4 percent on a quarter-on-quarter basis in the third quarter of last year.

Forecast for the fourth quarter of 2020: 0.4 percent increase expected

#6: United States FOMC Statement (01/27/2021 Wednesday 19:00 GMT)

forex market outlookThe Federal Reserve releases FOMC Statement eight times every year. At each release, the FOMC incorporates minor changes. The Fed uses the Statement as a tool to communicate with investors as regards the monetary policy. It provides the outcome of the members’ vote on setting interest rates as well as other policy measures. In addition, it provides commentary on the factors that impacted their votes. More importantly, it project’s the nation’s economic outlook and provides clues on future votes. Traders focus on these changes to understand the direction of interest rates in the future.

#7: United States Federal Funds Rate (01/27/2021 Wednesday 19:00 GMT)

In the monetary policy committee meeting held from 15 to 16 December 2020, the Federal Reserve reiterated that it was committed to employing all the tools at its disposal to support the nation’s economy as the uncertainty remained elevated. Furthermore, policymakers reassured market participants that they would be given sufficient notice before curtailing the asset purchases. The members of the FOMC also agreed that any improvement in the country’s economic condition is dependent on the status of the coronavirus infection and the ongoing public health crisis will weigh on inflation, economic activity, and employment in the near term. Additionally, the central bank opined that the worsening of the pandemic situation across the country will slow down economic recovery.

Forecast for January 2021: 0.25 percent

#8: United States FOMC Press Conference (01/27/2021 Wednesday 19:30 GMT)

The Federal Reserve Chair holds a press conference after the announcement of the Federal Funds Rate. The press conference lasts for about an hour and has two parts: reading a prepared statement and answering questions posed by the press. As the questions can often lead to unscripted answers, heavy market volatility can be expected during the course of the press conference.

#9: United States Advance GDP (01/28/2021 Thursday 13:30 GMT)

The US economy grew an annualized 33.4 percent in the third quarter of last year, slightly better than the second estimate of 33.1 percent. This is the biggest GDP growth ever, following the record 31.4 percent plunge in the previous quarter as the economy rebounded from the effects of the coronavirus pandemic. The upward revision to the GDP primarily reflected higher increases in nonresidential fixed investment and personal consumption expenditures. However, America’s GDP continues to remain 3.5 percent below the pre-pandemic levels. Although vaccination against coronavirus has already started, the pandemic is not yet under control. America is registering, on average, 200,000 new COVID-19 cases on a daily basis. All states are imposing tight restrictions. Meanwhile, Congress has approved a new $892 billion aid package in December which includes $600 payments to many Americans, unemployment benefit $300 per week, and $284 billion the Paycheck Protection Program. However, it excludes aid for local and state governments.

Forecast for the last quarter of 2020: 4.2 percent

#10: United States Unemployment Claims (01/28/2021 Thursday 13:30 GMT)

The number of people in America filing for jobless benefits fell to 900,000 during the week that ended on January 16 from the prior week’s 5-month high reading of 926,000. However, the reading for the week came in below analysts’ expectations of 910,000. Claims continued to remain well above the pre-pandemic levels and are expected to continue like this for some more time as the number of COVID-19 cases continued to increase at record rates. This has prompted many US states to impose restrictions in response to the second outbreak. On a non-seasonally adjusted basis, the number of jobless claims dropped to 961,000 from the 1,110,000 claims filed in the prior week.

#11: Canada GDP (01/29/2021 Friday 13:30 GMT)

Canada’s GDP grew 0.4 percent on a month-on-month basis in October last year, following the 0.8 percent expansion in the prior month. Analysts had expected the economy to grow by 0.3 percent during the month. With this, the country has registered economic growth for the sixth consecutive month. However, the economic activity continues to remain approximately 4.0 percent below February’s pre-pandemic levels. Both goods-producing and services-producing industries registered growth in activity. Sixteen out of the 20 industrial sectors recorded increases. Sectors such as professional services, finance and insurance, wholesale trade, public services, and construction recorded growth. Meanwhile, mining, oil and gas extraction, and quarrying sectors remained unchanged. The manufacturing sector registered contraction.

Forecast for November 2020: 0.4 percent expansion expected

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