AUD is an interesting market often affected by events in other countries. This week the domestic employment situation is revealed on Thursday 19th at 12.30am GMT with Employment Change and Unemployment Rate figures to be released.
The Aussie dollar has staged something of a comeback recently, but it always has a rocky ride when USD and CHY are bumpy. Last month’s Employment Change numbers were surprisingly positive (39.1k against the predicted 17.6k) but forecasts have still to be released. While Unemployment Rate data has hovered around 5.6% to 5.7% for months with no sign of a significant change on the cards.
Indications are for a bullish market, but unexpected data and negative pronouncements from Trump about international trade deals could set that adrift.
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Thursday 19th contains the first Minimum Bid Rate announcement of 2017 from the European Central Bank (ECB). As it has been held at 0.00% since January last year there is little expectation of change at this point.
More interesting for the markets will be the ECBPress Conference at 12.45pm where there will be a prepared statement and then questions from the press. Traders get an insight into the reasoning for the latest decision and possible hints about the future direction of fiscal policy. With the next announcement not until March, this has a significant impact on EUR markets. The European Union has decidedly wobbled since the previous announcement so journalists will be pressing to see what impact the Italian banking crisis and referendum have had on decision makers.
With a whole working week to run up to Friday’s presidential fireworks, there’s plenty to react to in USD markets along the way.
CPI and Core CPI data is released on Wednesday at 1.30pm GMT. A major indication of economic activity pundits expect minimal movement from last month, but nothing negative (0.2% to 0.3% and 0.2% to 0.2% respectively). With the FOMC tending to focus on the Core data, traders mostly do the same.
Thursday 19th has four key events: Building Permits, the Philly Manufacturing Index and Unemployment Claims at 1.30pm. Then Crude Oil Inventories at 4pm. Building Permits will be interesting as construction activity is a key indication of future economic growth. Forecasts are not out yet, so keep an eye out for those. Last month saw a decline in permits issued suggesting the market is waiting to see what happens after Trump enters office.
Fridayis the big day. Despite multiple scandals that would have unseated any other candidate, Trump has somehow made it to the White House. Currently embroiled in a massive scandal after an ex-British agent alleged he had damning evidence of Trump’s involvement with Russia, the world will be watching as he takes his oath of allegiance. The entire international community are waiting to see how Trump will play out the pledges he made during the presidential contest. He promised to rip up international trade deals, kick out illegal immigrants and cancel visas for any country that refused to take back its citizens, make massive income and business tax cuts, and use NATO to go after ISIS.
Markets are already reacting to news of Prime Minister May’s Brexit announcement, due today. The pound has taken a tumble, which is strange given Trump has decided Brexit is a good thing. It did rally slightly on this news, but continues to remain way below Friday’s levels.
But May’s speech isn’t the only thing moving sterling markets this week. Tuesday 17th sees the monthly Consumer Price Index at 9.30am GMT. Forecasts indicate another rise to 1.4%, which would see markets react positively, unless Brexit concerns overshadow it.
Wednesday 18th brings more GBP action focusing on employment and earnings. The Average Earnings Index is out at 9.30am and signs are for another increase to 2.6% while expectations for Claimant Count, also at 9.30am suggest a big rise to 4.6K but last month’s figures were way below expectations (2.4k compared to 6.2k predicted). Added uncertainty like this could rattle GBP traders.
Friday 20th will be dominated by the US presidential inauguration but Retail Sales is a primary indication of consumer spending, a major factor in any economy and pundits expect steady growth of 0.2% again. Data is released at 9.30am.
With major political events in the air, pundits expect markets could test below 1.20 again and large swings could happen across the week.
Trump’s inauguration on Friday 20th January looks set to be a political firework in markets across the globe, but especially in USD indexes. If we thought Brexit, the Italian referendum and the US election were a shock to the system, there’s a growing body of though that suggests the day the deal is signed and sealed will be even more tumultuous.
Grab a life jacket as traders will be reacting to any pronouncements on US policy and the ride is likely to be bumpy, which we like.
Friday 13th – unlucky for some. Will that be the case for China and CHY traders this week? The time of the announcement is not set so keep your eyes peeled for the monthly TradeBalance. Figures have been significantly below forecast for the last four months. Pundits suggest an extremely positive upswing to 345B from 298B. But predictions have been significantly wide of the mark since April 2016. The choice is yours.
However, the action for CHY starts on Tuesday at 1.30am GMT with the CPI y/y results; comparing average consumer prices in December with comparable products a year ago. Figures have hovered around 2% for a few months since September’s surprise dip to 1.3%. Predictions are for last month’s 2.3% to drop marginally to 2.2%. So, bar any shockwaves impacting from Trump’s election across the Pacific, forecasts seem steady, but that doesn’t always make them right, however.
If you’re the superstitious type, you may wish to finish your USD trading on Thursday this week. Because, apart from a projected leap (266k from 235k) in Unemployment Claims on Thursday 12th at 1.30pm, all the action for the dollar takes place on Friday 13th and that may spook some traders. After all there’s being a little off with your projections, and then there’s unlucky. Or really unlucky: like this girl.
But if you’re willing to risk it, there’s a wealth of USD action for you to enjoy to finish the week.
At 12.00am the Federal Chair, Yellen, is speaking in Washington DC. Expect most action to happen during questions as she may drop hints about future fiscal plans.
At 1.30pm we have three majors events: Core Retail Sales, PPI, and Retail Sales. Forecasts indicate a positive jump to 0.5% for both sales figures and a contrasting drop of 0.3% to 0.1% for the Producer PricesIndex.
To close the week, it’s the University of Michigan Preliminary Consumer Sentiment index at 3pm. This should be telling in the month of the presidential inauguration; does Joe Public think things are going to get better or worse. If the figure is an increase on last month’s 98.2 then domestic confidence is strong in the US economy.
Did Aussie high street tills ring with Christmas spirit, or did the threat of global protectionism hold back traditional splurging on presents? The Australian Bureau of Statistics reveals all on Tuesday 10th January at 12.30am.
Figures for Retail Sales in Australia have been somewhat disappointing over the last twelve months though the last quarter has seen a slight improvement. As consumer spending makes up such a large proportion of the economy this has a major effect on the currency.
Happily, Deloitte’s 2016 Retailers’ Christmas Survey suggested the majority of respondents are predicting an upswing. In fact, there are expectations of growth nearing 5% when compared to Christmas 2015 from a large proportion who replied. Trading forecasts seem less positive with less growth expected than occurred in November (0.4% expected compared to 0.5% actual).
Some production figures are going up and some are going down as some oil producers are in cahoots, but others are not playing ball. It’s anybody’s guess whether this strategy will backfire or not. But it definitely makes things interesting when planning your Wednesday oil game.
In terms of things going down it’s so far so good for the OPEC agreement as global oil leaders, the Saudis, are sticking to their pledge and cutting production. Reuters says output is still well over 1.5 million barrels per day more than agreed, but levels are moving in the right direction. Additionally, despite being exempt from the agreement, Niger’s output is also dropping as they battle internal militants. The US has a stockpile, which makes sense of the massive -7.1M drop on 5th January for Crude Oil Inventories. Some pundits say it’s unlikely such a significant drop will repeat itself, but a negative figure is still a strong possibility; though the current political situation in the States may cut a swathe through everyone’s expectations.
We mentioned some figures were rising. Right now the fly in the ointment for OPEC is Iran. While Iraq and Libya are except from the agreement so their increases were on the cards, Iran is bucking the global trend for cuts. Will it be enough to hold back OPECs desired price rise or are we looking at a long drive uphill for oil prices? Wednesday 11th at 3.30pm GMT will reveal the answer.
If 2016 has taught us anything, it’s that markets get more than a little jumpy when elections and referendums contain surprises. This means chances to make quick gains if you jump the right way. Happily then, 2017 is rammed with political events that are tipped to shake major currency markets to the core. It seems to be a year packed full of elections as governments around the world face the music and hear what the electorate really think of them.
January 20th – Trump’s inauguration
He’s passed the final electoral college hurdle and, major catastrophe not withstanding, Donald Trump will be inaugurated as President of the United States later this month becoming arguably the most powerful man on Earth. China has just appointed a diplomat solely to interpret his Twitter feed so if you don’t follow it, start now. The little gems from this man’s mouth will have USD markets twitchier than day 3 of a junkie’s decision to quit, as he is even more controversial than Bush was in 2000.
January – Brexit courtdecision Eleven of the UK’s finest legal minds have been cogitating over their Christmas puds to decide whether Prime Minister May is within her rights to trigger Article 50 and the UK exit from the European Union without getting the okay from Parliament, or whether she’s trying to pull a swift one. They will announce the result of their deliberations early in January and whichever way it goes, the GBP markets will be jittery.
February 12th – German Presidential elections
Populist groups are gaining ground across the country as anti-migrant sentiment grows. The way the vote goes will indicate to the markets the direction of popular sentiment and give the world an idea of how the major Bundestag elections will go at the end of the summer. Chancellor Merkel is seeking an historic fourth term, and Euro-centrists will be praying she gets it. Whatever happens, economic decisions in the largest economy in the EU will be influenced by hopes of portentous political gain this year.
March 8th – UK budget
This will be the last UK budget delivered in the Spring and the first after the world knows what the timetable for Brexit will be. Fiscal policy announcements could see banks and traders changing their strategy for GBP markets.
March 15th – Dutch general elections
The EU’s latest time bomb is potentially ticking in the Netherlands. A worrying rise in popularity for far right Eurosceptic parties mean this election is poised to deliver a further blow to the European project and could destabilise EUR trading.
March 26th – Hong Kong Chief Executive election
After controversial wins by pro-democracy candidates in the 2016 elections, Beijing made some interesting interpretations of the law and prevented many from achieving office. With the Communist party conference later in the year, the central party leaders will want to find a centrist candidate who won’t rock the boat. But that doesn’t mean the voters will choose them. Expect waves through the CHY markets around this time.
March 31st – Article 50 deadline
Prime Minister May could be starting to regret her promise to trigger Article 50 by 31st March. Recent mutterings about banks negotiating with Paris and other central European cities could gather pace in the run-up to the deadline and risk undermining banking confidence in London. While this would have most effect on the FTSE indexes, it could hammer sterling too. What’s most likely is a very bumpy ride, which could be lots of fun for TIQL players.
April 23rd – French Presidential elections
As if the Euro didn’t have enough on its plate, the French are due to elect a new President at the end of April. The integrity of Europe is already under the microscope as the campaigns begin, and there is a growing support for far right anti-centrist groups here, too. Le Pen has already called for France to leave the Euro and if this proves popular with the electorate, the currency could have a rocky road ahead. There is a chance France could become the first western democracy to elect a far-right head of state with executive powers since 1945. And we thought 2016 was insane.
May 19th – Iranian Presidential elections
If you trade oil markets, the developments in Iran will be a key story to follow over the next few months. Some say incumbent President Rouhani, a moderate, may become the first one-term president of the country. Key issues will be the country’s nuclear programmes and their economy. Rouhani has achieved progress in the lifting of sanctions, but internal ructions may lead to his downfall despite the progress made. Recent news shows lots of interest from international companies in oil production in Iran but this could come to a grinding halt if the political wind changes direction.
June – Italian general elections With rumours of a snap early election dashed, analysts suggest June is the likely month for the next Italian general election after Renzi’s almost too predictable defeat in December’s poll. MPs could push the election back as far as September, but whatever happens, the EU is looking at another political battering in the summer. EUR pairs will go for a ride and safe havens could see a boost.
July 7th – Trump and Putin’s first G20 summit
The arena for what could be the most momentous occasion on the world’s political stage this year. Press releases and conferences will be pored over by traders across the globe during the summit in Hamburg.
Autumn – Chinese Communist Party Congress
Many of the current Politburo Standing Committee are expected to retire at this year’s Congress, and the new leadership will be chosen and announced. However, Xi Jinping, the General Secretary is widely expected to continue. Economic concerns about dwindling FX reserves could lead to changes in China’s international stance and, by autumn, Trump will have set out his stall towards the communist giant. All of this leads to less predicted security for CHY over 2017. But surprises can come from anywhere.