Forex Market Outlook For The Week January 7 – 11, 2019

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Though the Non-Farm Payrolls data did create some commotion, the mood continues to remain damp at the start of the New Year. This is because the Chinese slowdown seems to be more or less real. Further, the trade talks are continuing and the Brexit still looms large. Meanwhile, the first full trading week of the New Year promises to provide some action with the FOMC Meeting Minutes and the inflation data from the U.S. Here is an outlook of some of the key releases from around the world.

#1: U.S. ISM Non-Manufacturing PMI (01/07/2019 Monday 15:00 GMT)

forex market outlookIn the U.S., the ISM Non-Manufacturing PMI edged upward to the 60.7 level in November last year from the 60.3 level in the previous month. The reading for November beat analysts’ expectations that the index will hit the 59.2 level. The non-manufacturing sector in the U.S. continued to show strong growth during November despite persisting concerns related to tariffs and employment resources. The respondents remained positive as regards the economy’s direction and current business conditions. Forecast for December 2018: 59.6

#2: Canada Trade Balance (01/08/2019 Tuesday 13:30 GMT)

Canada’s trade deficit increased to C$1.17 billion in October after the deficit for the previous period was revised upward to C$ 0.89 billion. Analysts had expected the deficit to come in at C$0.7 billion. Exports fell by 1.2 percent in October, driven by lower crude oil exports. Imports declined 0.6 percent mainly because of the reduction in light trucks and passenger cars imports. Forecast for November 2018: Canada’s trade deficit is expected to come in at C$1.9 billion

#3: Canada BoC Monetary Policy Report (01/09/2019 Wednesday 15:00 GMT)

The Bank of Canada’s Monetary Policy Statement provides in-depth insight into the central bank’s view on inflation and economic conditions. These are key factors based on which monetary policy decisions arrived at. The statement also provides clues on the direction of interest rates in the future.

#4: Canada BoC Rate Statement (01/09/2019 Wednesday 15:00 GMT)

The Bank of Canada uses the Rate Statement as a tool to communicate with investors as regards the monetary policy. It provides the outcome of the members’ decision on setting interest rates and a commentary on the economic conditions that impacted their decision. More importantly, it provides an economic outlook and clues on the direction of future decisions.

#5: Canada Overnight Rate (01/09/2019 Wednesday 15:00 GMT)

In the meeting held in December, the Bank of Canada decided to leave the benchmark Overnight Rate steady at the 1.75 percent level, after the key interest rate was increased by 25 bps in the prior meeting. This was in line with analysts’ expectations. This is the highest rate ever since December 2008. Further, the policymakers indicated that more interest rate increases would be needed to maintain inflation at the neutral target range of 2.0 percent. They also noted it will depend upon various factors such as consumption and housing, oil price shock, developments in global trade policy, business investments, and the assessment of the capacity of the economy by the central bank. The Bank and deposit rates were also left steady at the 2.0 percent and 1.50 percent levels, respectively. Forecast for January 2019: The Bank of Canada is expected to increase the Overnight Rate by 25 bps to the 2.0 percent level

#6: Canada BoC Press Conference (01/09/2019 Wednesday 15:15 GMT)

The Governor and Senior Deputy Governor of the Bank of Canada will hold a press conference after the announcement of the Overnight Rate. The press conference has two parts. In the first part, the Governor will read out a prepared statement. In the second part, they answer questions by the press. As the questions might often lead to answers that are not scripted, heavy market volatility can be expected.

#7: U.K. BoE Governor Mark Carney Speaks (01/09/2019 Wednesday 15:30 GMT)

Mark Carney, Governor of the Bank of England, is scheduled to participate in an online question and answer session as regards the future of money at the Future Forum of the Bank of England. Markets often turn volatile during his speeches. This is because traders make an attempt to understand the direction of interest rates in the future.

#8: U.S. FOMC Meeting Minutes (01/09/2019 Wednesday 19:00 GMT)

The Federal Reserve releases the FOMC Meeting Minutes eight times in a year, three weeks after the announcement of the Federal Funds Rate. It provides a detailed account of the committee’s most recent meeting and in-depth insight into the financial and economic that impacted the members’ vote on setting interest rates.

The Fed raised the interest rates during the last meeting in 2018 but downgraded the projections for this year to two hikes from three specified earlier. Markets were happy as the expectation was that the Fed would make deeper cuts in the number of hike forecasts. Moreover, Jerome Powell, Fed Chair, said that the shrinking of the balance sheet will be continued. Further, quantitative tightening continues to remain on “auto-pilot.” It is expected that the minutes of the last meeting will shed more light as regards the central bank’s thinking prior to the meeting scheduled to be held later this month.

#9: U.S. Fed Chair Powell Speaks (01/10/2019 Thursday 17:00 MT)

Jerome Powell, Fed Chair, is scheduled to speak in Washington at the Economic Club Luncheon. Markets often turn volatile during his speeches. This is because traders make an attempt to understand the direction of interest rates in the future.

#10: Australia Retail Sales (01/11/2019 Friday 00:30 GMT)

In Australia retail trade rose by 0.3 percent on a month-over-month basis in October after the figure for the previous month was revised downward to an increase of 0.1 percent. The reading for October beat analysts’ expectations for a 0.2 percent gain. The increase in retail trade was driven by clothing, personal accessories, and footwear sales. This was followed by household goods retailing, food retailing, department stores, and other retailing. On other hand, sales at cafes, takeaway food services, and restaurants declined. Forecast for November 2018: an increase of 0.3 percent is expected

#11: U.K. GDP (01/11/2019 Friday 09:30 MT)

Britain’s economy grew at a meek pace of 0.1 percent in October after remaining flat in the prior two months but grew at a better pace in the third quarter of last year. The data for November 2018 is slated to be released on this day and it is expected to come in at the same level of 0.1 percent growth. The accord reached by the UK and the EU as regards the Brexit remains in tatters now.

#12: U.K. Manufacturing Production (01/11/2019 Friday 09:30)

In the U.K., manufacturing production fell by 1.0 percent on a year-on-year basis in October after increasing 0.5 percent in the prior month. Factory activity declined for the first time since October 2016. Analysts had expected the reading to remain unchanged. Production of basic pharmaceutical products and preparations and transport equipment declined. Production of textiles, wearable leather and apparel products; wood and wood products; rubber and plastic products, and basic metals and metal products fell at the fastest pace. On a month-on-month basis, manufacturing output declined 0.9 percent after gaining 0.2 percent in September. Forecast for November 2018 on the month-on-month basis: an increase of 0.4 percent is on the cards

#13: U.S. CPI and Core CPI (01/11/2018 Friday 13:30 GMT)

In the U.S., consumer prices remained unchanged on a month-over-month basis in November after recording an increase of 0.3 percent in the previous month. The reading for October was in line with analysts’ expectations. The gasoline index dropped by 4.2 percent and offset increases in several indexes including used trucks and, and shelter. Other major energy component indexes remained mixed. While the fuel oil index fell, the indexes for natural gas and electricity rose. The indexes for food, food at home, and food away also rose. Excluding the volatile energy and food prices, the core CPI rose by 0.2 percent, same as the gain in October. CPI and Core CPI are expected to come in at -0.1 percent and 0.2 percent, respectively, in December 2018

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