Forex Market Outlook For The Week January 27 – 31, 2020

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Last week, hints of risk aversion were observed. This was brought by the spreading of the Coronavirus. In the upcoming week, heavy market volatility can be expected as Britain, at last, gets ready to leave the European Union and the U.K. and the U.S. are scheduled to announce their monetary policy decisions. Other important announcements include the U.S. GDP growth data for the fourth quarter of last year and inflation figures from Australia. Having said that here is an outlook on some of the key economic data releases from around the world:

#1: Germany Ifo Business Climate (01/27/2020 Monday 09:00 GMT)

In Germany, the Ifo Business Climate Index rose to the 96.3 level in December last year from the revised 95.1 level in the prior month. The reading for the month beat analysts’ expectations of the 95.5 level for the index. December’s reading was the highest ever since June last year and was boosted by an improvement in the assessment of the current situation by companies and their expectations. Sentiment improved across sectors among manufacturers and service providers. However, sentiment deteriorated among builders and traders.

Forecast for January 2020: 97.1

#2: United States Conference Board Consumer Confidence (01/28/2020 Tuesday 15:00 GMT)

forex market outlookIn the United States, consumer spending is not likely to increase in early 2020, the Consumer Confidence Index reported by the Conference Board indicated. In December 2019, the index declined marginally, following the slight increase in the previous month. The index came in at the 126.5 level last month, down from the upwardly revised 126.8 in November 2019. While the Present Situation Index increased to 170.0 from 166.6, the Expectations Index decreased to 97.4 from 100.3 last month.

Forecast for January 2020: 128.2

#3: Australia CPI (01/29/2020 Wednesday 00:30 GMT)

In Australia, the Consumer Price Index rose by 0.5 percent in the September quarter of last year, follows the 0.6 percent increase in the previous quarter. Prices increased for international holiday travel as well as accommodation, tobacco, property rates and charges, and child care. Significant price falls were reported for automotive fuel, fruits, and vegetables. The CPI increased by 1.7 percent over the year to the third quarter of 2019, following the increase of 1.6 percent over the year up until the second quarter of 2019.

Forecast for the last quarter of 2019: 0.6 percent

#4: Australia Trimmed Mean CPI (01/29/2020 Wednesday 00:30 GMT)

In Australia, the Trimmed Mean CPI increased by 0.4 percent on a quarter-on-quarter basis in the third quarter of last year.

Forecast for December quarter of 2019: an increase of 0.4 percent is expected

#5: United States FOMC Statement (01/29/2020 Wednesday 19:00 GMT)

The US FOMC releases the Statement eight times in a year. Generally, the FOMC makes slight changes to the Statement during each release. Traders focus on these changes for clues on the direction of interest rates in the future. The FOMC uses it as a tool to communicate with investors as regards the monetary policy. In addition to providing details as regards the outcome of the members’ vote on setting interest rates and finalizing other policy measures, it offers a commentary on the economic conditions that impacted their decision. More importantly, it gives an idea of the nation’s economic outlook.

#6: United States Federal Funds Rate (01/29/2020 Wednesday 19:00 GMT)

In the meeting held in December 2019, the officials from the Federal Reserve agreed that for some period their stance on the current interest rate is unlikely to be changed despite concerns related to low-interest rates exacerbating the imbalances in the financial sector. Policymakers also decided to discuss and bring about changes as regards the management of financial market liquidity by the central bank at future meetings. They also decided to consider the possibility of establishing a standing repo facility and the composition of the holdings of Treasury securities by the Fed over the longer term. In the most recent meeting, the Federal Reserve decided to leave the federal funds rate target unchanged at 1.5 to 1.75 percent, signaling that it has no plans of changing rates in 2020. The Fed’s decision was in line with analysts’ expectations.

Forecast for January 2020: below 1.75 percent

#7: United States FOMC Press Conference (01/29/2020 Wednesday 19:30 GMT)

The Federal Reserve Chair holds a press conference eight times in a year after the announcement of the Federal Funds Rate. There are two parts to the one-hour long press conference. In the first part, the Federal Reserve Chair reads out a prepared statement. In the second part, he answers questions from the press. As the questions by the press often lead to answers that are not scripted, heavy market volatility can be expected.

#8: United Kingdom BoE Monetary Policy Report (01/30/2020 Thursday 12:00 GMT)

The Bank of England releases the Monetary Policy Report on a quarterly basis. The report provides the BoE’s economic growth and inflation projection over the next two years. The Governor of the Bank of England holds a press conference after the release of the report to discuss its contents. The report provides in-depth insight into the bank’s expectation as regards inflation and economic conditions.

#9: United Kingdom BoE MPC Official Bank Rate Votes and Official Bank Rate (01/30/2020 Thursday 12:00 GMT)

The Monetary Policy Committee members of the Bank of England voted 0-2-7 to hold the Official Bank Rate at the current level of 0.75 percent during the monetary policy committee meeting held in December. This was because the policymakers decided to take a wait-and-watch approach after the election victory of Prime Minister Boris Johnson and the possible Brexit implications. For the second month in a row, two of the members have voted for a cut in the interest rate amid concerns as regards the job market.

Forecast for January 2020: 0-2-7 and 0.75 percent

#10: United Kingdom BoE Monetary Policy Summary (01/30/2020 Thursday 12:00 GMT)

The Monetary Policy Committee of the Bank of England uses it as a tool to communicate with investors as regards the monetary policy. The summary report contains the outcome of the members’ vote on setting interest rates and deciding other policy measures. It also includes commentary on the economic conditions that impacted their decision. More importantly, it discusses the nation’s economic outlook and offers clues on future votes.

#11: United States Advance GDP (01/30/2020 Thursday 13:30 GMT)

The American economy grew by 2.1 percent in the third quarter of last year on an annualized basis. This was the same as the second estimate. In the prior three months, America’s GDP grew by 2 percent. The growth in real GDP during the September quarter was attributed to positive contributions from federal government spending, PCE, residential investment, state and local government spending, and exports. The positive contributions were partly offset by negative contributions from private inventory investment and nonresidential fixed investment. Imports increased.

Forecast for the fourth quarter of 2019: 2.2 percent

#12: China Manufacturing PMI (01/31/2020 Friday 01:00 GMT)

In China, the Manufacturing PMI reported by the NBS remained unchanged at the 50.2 level in December last year. The reading for the month came in slightly above analysts’ expectations of 50.1 and the latest reading of the PMI pointed to expansion in factory activity for the second straight month supported by the stimulus measures initiated by the government and optimism related to the trade war agreement signed with the United States. Output growth accelerated and new orders continued to increase due to a rebound in exports. Employment fell further. Input prices rose, while selling prices declined for the eighth month in a row but at a slower rate. Business sentiment softened a little bit from the seven-month high reported in November.

Forecast for January 2020: 50.1

#13: Canada GDP (01/31/2020 Friday 13:30 GMT)

In the third quarter of last year, the Canadian economy advanced 0.3 percent on a quarter-on-quarter basis, slowing down from the 0.9 percent expansion in the prior period. Business investment and household spending drove growth. On an annualized basis, the real GDP grew 1.3 percent in the September quarter of last year, easing from the 3.7 percent growth in the previous period. The annualized growth rate for the quarter beat analysts’ expectations of 1.2 percent.

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