Last week, the U.S. dollar continued to enjoy the optimism related to upbeat data and tax cuts. The dollar received a great deal of support following the approval of the tax bill by the Senate. Meanwhile, the European Union and the United Kingdom edged towards a Brexit breakthrough. However, the effort was derailed by the Northern Irish DUP. This sent the pound lower though it rallied at the start of the trading week.
The economic data releases for the upcoming week include four interest rate announcements from the Swiss National Bank, European Central Bank, Bank of England, and Federal Reserve. As far as Yellen is concerned, this will be her last press conference following the interest rate decision. Here is an outlook on some of the announcements:
#1: U.K. CPI (12/12/2017 Tuesday 09:30 GMT)
In the U.K., the inflation rate continued to remain at over the 5-year high level of 3.0 percent in the month of October on a year-on-year basis. However, the reading came in slightly below analysts’ expectation of 3.1 percent. While the prices of non-alcoholic beverages and food, and health costs rose, the transportation and communication costs, and furniture prices declined. Forecast for November: 3.0 percent
The higher inflation rate could also be attributed to the weakness in pound caused by Brexit. The U.K. central bank expects the inflation rate to slide in the coming months. The CPI announcement has a bearing on the interest rate decision later this week.
#2: U.S. PPI (12/12/2017 Tuesday 13:30 GMT)
In the U.S., final demand goods producer prices increased in October by 0.4 percent on a month-on-month basis. On an annual basis, the producer prices increased 2.8 percent after rising 2.6 percent in the previous month. Analysts had expected an increase of 2.4 percent. This is by far the highest producer inflation rate since February 2012. The core PPI also rose by the same percentage points. Producer prices provide a hint on the consumer prices data scheduled to be released on Wednesday. Forecast for November: 0.4 percent increase
#3: European Central Bank President Mario Draghi Speaks (12/12/2017 Tuesday 19:00 GMT)
Mario Draghi, President of the European Central Bank, is scheduled to speak at the 2017 European Cultural Days Closing Concert that is being hosted by the central bank in Frankfurt. Market volatility can be expected during his speeches. This is because traders make an attempt to understand the direction of interest rates.
#4: Reserve Bank of Australia Governor Philip Lowe Speaks (12/12/2017 Tuesday 22:15 GMT)
Philip Lowe, Governor of the Reserve Bank of Australia, is scheduled to deliver a speech at the 2017 Australian Payment Summit in Sydney on the topic “An eAUD?” Markets are likely to experience volatility as the audience is expected to ask questions.
#5: U.K. Average Earnings Index (12/13/2017 Wednesday 09:30 GMT)
In the U.K.’ total earnings of workers, including bonuses, increased 2.2 percent to £509 per week during the three months period to September after the figure for the previous period was revised upward to an increase of 2.3 percent. The reading for September came in above analysts’ expectation of 2.1 percent increase. Excluding bonuses, earnings declined by 2.2 percent to £477 per week. In real terms, earnings dropped by 0.4 percent and 0.5 percent including and excluding bonuses, respectively. Forecast for October: 2.5 percent increase including bonuses
#6: U.S. CPI/Core CPI (12/13/2017 Wednesday 13:30 GMT)
In the U.S., the consumer prices rose by 0.1 percent on a month-over-month basis in October, which was lower than the 0.5 percent increase recorded in September. However, the growth in the inflation rate was in line with analysts’ expectation. The shelter index was the driver of the inflation rate. The core CPI, which excludes the volatile energy and food prices rose by 0.2 percent on a month-on-month basis in October after edging up 0.1 percent in September. Forecast for November: an increase of 0.4 percent and 0.2 percent, respectively.
The CPI data is scheduled to be released hours before the interest rate decision by the Federal Reserve. It will be interesting to know whether the inflation is subdued or
“transitory.” A rise in the inflation rate in November will make the case for an interest rate hike more convincing.
#7: Crude Oil Inventories Change (12/13/2017 Wednesday 15:30 GMT)
In the U.S., crude oil stocks dropped 5.61 million barrels during the week that ended on December 1 after a decline 3.429 million barrels in the prior period. Analysts had expected the stocks to decline 3.404 million barrels. Gasoline stocks, on the other hand, rose by 6.780 million barrels after recording an increase of 3.627 million barrels in the prior week. Analysts had expected an increase of 1.741 million barrels. This is by far the biggest increase since January.
#8: U.S. Federal Open Market Committee Economic Projections (12/13/2017 Wednesday 19:00 GMT)
The Federal Open Market Committee releases the economic projections report four times in a year. This report provides FOMC’s economic growth and inflation projection for the next two years. More importantly, it consists of the breakdown of interest rate forecasts of individual members. It is the FOMC’s tool to communicate with the investors.
#9: U.S. Federal Open Market Committee Rate Statement (12/13/2017 Wednesday 19:00 GMT)
The FOMC releases the rate statement eight times in a year. The committee changes the statement a little bit at each release. Traders focus on these changes. The FOMC uses this as a tool to communicate with investors as regards the monetary policy. It consists of the outcome of decisions on interest rates as well as policy measures. It also provides a commentary on the economic conditions that led to the decision. More importantly, it provides an economic outlook and clues on future decisions.
#10: U.S. Federal Reserve Funds Rate (12/13/2017 Wednesday 19:00 GMT)
The Federal Reserve decided to leave the federal funds rate target range at the same level of 1.0 percent to 1.25 percent during the meeting held in November. This was widely expected by the market. Policymakers noted that the labor market has remained strong and economic activity has improved despite disruptions caused by hurricanes. As such, a rate hike can be anticipated in December.
It is expected that the Fed would raise the rates for the 5th time in the cycle and for the third time in 2017. The rate is likely to be hiked the 1.25 percent to 1.50 percent range. The Fed will also release employment, inflation, and growth, projections. As of now, the American central bank projects three hikes next year.
#11: U.S. Federal Open Market Committee Press Conference (12/13/2017 Wednesday 19:30 GMT)
The Federal Reserve Chair addresses an hour-long press conference after the announcement of the Funds rate. The press conference has two parts: the reading of a prepared statement and a press questions session. As the questions by the press lead to answers that are not scripted, heavy market volatility can be expected. Traders look for clues on the direction of interest rate in the future.
#12: Australia Employment Change and Unemployment Rate (12/14/2017 Thursday 00:30 GMT)
In Australia, employment rose by 3,700 in October. On a seasonally adjusted basis, the unemployment rate fell unexpectedly to 5.4 percent from 5.5 percent in the prior month. Analysts expected the unemployment rate to come in at 5.5 percent. This is the lowest unemployment rate since February 2013 as the number of unemployed people in Australia decreased by 8,100.
#13: China Industrial Production (12/14/2017 Thursday 02:00 GMT)
In China, industrial production rose by 6.2 percent on a year-on-year basis in October after recording an increase of 6.6 percent in September. The reading for October came in slightly below analysts’ expectation of 6.3 percent growth. On a month-on-month basis, industrial production rose by 0.50 percent. Forecast for November: 6.2 percent
#14: Swiss National Bank Monetary Policy Assessment (12/14/2017 Thursday 08:30 GMT)
Released on a quarterly basis, the monetary policy statement is a tool for the central bank’s Governing Board to communicate with investors as regards the monetary policy. It provides information about the outcome of the members’ decision on interest rates. It also provides a commentary on the economic conditions that impacted their decisions. More importantly, it provides an economic outlook and clues on the direction of interest rates in the future.
#15: Swiss National Bank Libor Rate (12/14/2017 Thursday 08:30 GMT)
In the meeting in September, the Swiss National Bank decided to leave the deposit interest rate unchanged at the record low level of -0.75 percent as was widely expected by the market. The aim of the central bank is to support growth and stabilize inflation. Policymakers noted that the weakness of the Swiss franc in the recent times against the euro and its strength against the U.S. dollar has been helpful in reducing the currency’s overvaluation even though its value continues to remain high. The central bank lowered its growth forecast to below 1.0 percent in 2017 from 1.5 percent but raised the inflation forecast to 0.4 percent from 0.3 percent. Forecast for December: -0.75 percent
#16: Swiss National Bank Press Conference (12/14/2017 Thursday 09:00 GMT)
The Chairman of the Swiss National Bank and members of the Governing Board attend the press conference that is held after the announcement of rates in the months of June and December. The press conference lasts for about an hour. It has two parts: the reading of a prepared statement and answering press questions. As the questions posed by the press frequently lead to answers that are not scripted, market volatility can be expected.
#17: U.K. Retail Sales (12/14/2017 Thursday 09:30 GMT)
In the U.K., retail sales increased 0.3 percent on a month-over-month basis in October after the reading for the previous month was revised downward to represent a decline of 0.7 percent. The retail sales figure for October came in above analysts’ expectation for a 0.1 percent increase. For the three months to October, the increase in retail sales was 0.9 percent. Forecast for November: 0.4 percent increase
#18: U.K. Bank of England Monetary Policy Committee Official Bank Rate Votes (12/14/2017 Thursday 12:00 GMT)
The members of the Monetary Policy Committee of the Bank of England voted 7-0-2 to the Official Bank Rate to 0.50 percent during the meeting in November. The committee also voted unanimously for maintaining the stock of UK government and corporate bonds purchases. In the meeting in December, members are expected to vote 0-0-9 for maintaining the interest rate at the current level.
#19: U.K. Bank of England Monetary Policy Summary (12/14/2017 Thursday 12:00 GMT)
The Bank of England releases the Monetary Policy Summary on a monthly basis. It consists of the details about the outcome of the latest interest rate meeting apart from other policy measures. It also contains a commentary on the economic situations that influenced the votes. More importantly, it provides the nation’s economic outlook and clues on future votes.
#20: U.K. Bank of England Official Bank Rate (12/14/2017 Thursday 12:00 GMT)
In the meeting on November 2, the Bank of England hiked its benchmark Official Bank Rate by 25 basis points to 0.5 percent as widely expected by the market, signaling the start of tightening process. The central bank raised the interest rate for the first time in a decade as inflation remained above the 2.0 percent target range for the eighth in a row, though the sterling remained weak and energy prices were high. According to policymakers, inflation will decline in 2018. Forecast for December: 0.5 percent
#21: European Central Bank Minimum Bid Rate (12/14/2017 Thursday 12:45 GMT)
The European Central Bank decided to hold the benchmark refinancing interest rate at the 0 percent level during the meeting in October as was widely expected by the market. The central bank also decided to cut down the quantitative easing plan to the monthly pace of 30 billion euros from January onwards with the option to extend in September 2018. Forecast for December: 0 percent
#22: European Central Bank Press Conference (12/14/2017 Thursday 13:30 GMT)
The President and the Vice President of the European Central Bank participate in the press conference that is held 45 minutes after the announcement of the minimum bid rate.
The press conference is held eight times in a year. The press conference lasts for an hour long and has two parts: the reading of a prepared statement and addressing the press questions. As questions can lead to answers that are not scripted, heavy market volatility can be expected.
#23: U.S. Retail Sales and Core Retail Sales (12/14/2017 Thursday 13:30 GMT)
In the U.S., retail sales rose by 0.2 percent on a month-over-month basis in October, which was better than the analysts’ expectation for no growth. The reading for the prior month was revised upward to an increase of 1.9 percent in September. Nine out of thirteen major categories registered month-over-month sales increases. Forecast for November: 0.3 percent increase
Core retail sales increased 0.1 percent in October and it is predicted to jump 0.7 percent in November.
#24: U.S. Unemployment Claims (12/14/2017 Thursday 13:30 GMT)
The number of American people filing for jobless benefits decreased 2,000 to 236,000 during the week that ended on December 2. The reading for the month came in below analysts’ expectation of 240,000 claims. Claims for unemployment benefits have declined for three weeks in a row. This is the lowest since October last week. Claims taking procedures remained disrupted in Puerto Rico and the Virgin Islands.
#25: Bank of Canada Governor Stephen Poloz Speaks (12/14/2017 Thursday 17:25 GMT)
Stephen Poloz, the Governor of the Bank of Canada, is scheduled to speak on the subject “Three Things Keeping Me Awake at Night” at the Toronto Canadian Club. Markets remain volatile during his speeches as traders look for interest rate clues.