Trump’s inward-looking wall-building policies don’t seem to have put off dollar investors as the currency climbed to the end of last week. His tweets, executive orders or other gems could take USD on a merry ride as the week starts. But traders will be looking ahead to February for a little reality check.
Wednesday’s fact check comes in the form of the FOMC Statement at 7pm GMT. The statement includes their view on the economic factors that have affected their decision. Chair Yellen isn’t in Trump’s pocket so there could be some less than subtle digs about the direction the nation is taking.
While Crude Oil Inventories have been climbing again in January after weeks of enormous stockpile slashes, forecasters predict stagnation this week with no move in stock levels at 2.8M barrels. That’s out at 3.30pm GMT on 1st February giving traders something to mull over before the FOMC fireworks. later the same day.
Thursday 2nd offers up Unemployment Claims at 1.30pm GMT. Last week surprised pundits with a leap of around 25k in new claims to 259k. But they seem hopeful of an improvement suggesting a drop to 251k is on the cards this week.
Rounding the week off is the ever-excitable Non-Farm Employment Change on Friday at 1.30pm GMT along with its counterparts Average Hourly Earnings and Unemployment Claims. Regular readers will know that traders set their stalls out for Non-Farm each month. And the figures have been shocking with January’s data a hefty 19k below December’s figures at 156k. Analysts are usually at least 10k out and have been steadily predicting around 170-180k for a long while. This month they say to expect 170k. We would suggest that is an alternative fact.
After a 6-week high the pound lifted again with the idea of a UK/USA trade deal but took a dive later on Friday as markets waited to hear if Moody’s would be downgrading their credit rating.
Events that could keep sterling interesting this week are focused around Mark Carney, the BoE Governor, whose speech is the finale of a fun-filled Thursday. The 2nd kicks off with a battery of market-moving Bank data.
12pm GMT Bank of England Inflation Report
12pm GMT MPC Official Bank Rate Votes
12pm GMT Monetary Policy Summary
12pm GMT Official Bank Rate (currently 0.25%)
Then, with perfect comic timing, Mark Carney gives his speech about it all 15 minutes after the European Central Bank president, Draghi, makes a speech. Talk about stealing his thunder. Thursday is going to be handbags at dawn if we’re not careful. So mark your diary as busy if you trade GBP or EUR because
Theresa May, UK Prime Minister, was the first foreign leader to visit Trump after his inauguration and the currency markets reacted like a bucking bronco. One imagines they reminisced about the Reagan/Thatcher era, but living in the past isn’t usually a good plan.
At the press conference, May spoke a lot about the special relationship between the two countries and a potential trade agreement was discussed that would kick in ASAP after Brexit is finalised. This is sure to please the EU commissioners who are trying to dictate that no other trade agreements can be discussed until the UK is out of the EU. Sounds like no-one was listening at the UK/USA love-in that took place on Friday 27th January and it boosted both currencies ready to start this week on a high.
Look out for more market-moving news as Trump signs more executive orders on many of his election promises this coming week.
The Bank of Japan is keeping its cards close to its chest and not telling anyone exactly when it will release its Monetary Policy Statement, Interest Rate and Outlook Report until it happens early on Tuesday 31st.
But it has scheduled a Press Conference for 6.30am on Tuesday 31st January, which is a bit of a clue, and that is when traders will especially be watching like hawks. The spokesperson could reveal useful tidbits about the Bank’s view of the economy and how they might want to stimulate growth.
The UK’s highest court delivers its ruling on Tuesday 24th at 9.30am GMT. It will be all over the news, and traders will get jumpy, which is all good fun for TIQL traders.
Despite May’s best efforts, that darned democratic process could mean she has to get the approval of the UK representatives, MPs, for her Brexit proposals before she can negotiate with Europe. If she fails to make her case and the judges rule against her, she’ll be negotiating with all her cards on the table for the world to see and one hand tied behind her back.
President Draghi of the European Central Bank is at a swish do on Sunday night to receive a prestigious Italian political award. Not surprising considering the Italian banking sector and economy are having a minor crisis; a bit of sucking up to the man who could save them isn’t a bad plan. What makes all this self-congratulation interesting though is the speech and the timing.
11pm GMT Sunday night is around an hour after markets open for the week. And it is going to be quite a week – Trump has been let loose in the White Hall to wreak havoc, and May gets the law spelt out for her Brexit plans on Tuesday. Traders will be hanging on Draghi’s every word for his reaction to May’s perceived hardened attitude. Can he reassure them that the Euro is in safe hands? And what will he say about future trade relations with the US?
What traders take from his pearls of wisdom will set the tone for the currency trading week. It’s anybody’s guess about whether they will be reassured or alarmed.
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.