Key Fundamental Factors this Week 3/23 – 3/27

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Key Fundamental Factors this Week 3/23 - 3/27

Last week, a key event risk was the FOMC monetary policy meeting. The market ended up fading the USD across the board even though there wasn’t any substantial change in the overall tone of the statement. Let’s take a look at this upcoming week’s key fundamental factors.

Monday 3/23

US Existing Home Sales (Feb.annualized)
Forecast 4.91M
Previous: 4.82M

ECB President, Mario Draghi will be speaking before the European Parliament’s Economic and Monetary Affairs Committee. He will likely tout the importance of the bank’s current QE measures. All the big issues have been laid out on the table, but we can still get a sense of what Draghi thinks of inflation and growth projections, which can effect how long QE lasts.

Tuesday 3/24

Eurozone Flash Manufacturing PMI (Mar.)
Forecast: 51.6
Previous: 51.0
eurozone manufacturing
(click to enlarge; source: forexfactory.com)

Eurozone Flash Services PMI

Forecast: 53.9
Previous: 53.7
Manufacturing remains in expansion in the Eurozone after a threat of sliding into contraction at the end of 2014. The services sector has remained healthy for the most part. These are not the data points that will drive market movement because they have stabilized. Inflation and jobs data are the 2 key factors that are driving the ECB’s monetary policy decisions.

German Flash Manufacturing PMI (Mar.)
Forecast: 51.5
Previous: 51.1
german manufacturing
(click to enlarge; source: forexfactory.com)
German Flash Services PMI
Forecast: 55.0
Previous: 54.7

UK CPI y/y (Feb.)
Forecast: 0.1%
Previous: 0.3%
uk inflation
(click to enlarge; source: forexfactory.com)
There is quite a bit of disinflation in the UK for almost 2 years now. Monetary policy has been turning dovish, but only in tone. The BoE is open to tight or loose monetary policy, but inflation data in-line with this month’s forecast will push it towards the loose monetary policy stance and might open the door for a rate cut towards the end of this year.

US CPI m/m (Feb.)
Forecast: 0.2%
Previous: -0.7%
us inflation
(click to enlarge; source: forexfactory.com)
Core CPI m/m (Feb.)

Forecast: 0.1%
Previous: 0.2%
After 3 months of negative headline inflation in the US, it is critical that we see a rebound to the positive side if the FOMC is still going to consider raising rates. And if we are going to see rates raised mid-year, we better see 3 consecutive positive inflation months preferable each successfully stronger. If we don’t see a positive inflation number for February, the USD could be due for a significant correction.

US New Home Sales (Feb. annualized)
Forecast: 472K
Previous: 481K

New Zealand Trade Balance (Feb.)
Forecast: 355M
Previous: 56M
A positive trade balance should help strengthen the NZD, in theory, and in the long-run. In the short-term it will still be pressured agianst the USD, but if we do start to see strong trade surplus expand during the middle of the year as we have seen in the past 6  years, the NZD/USD might find support for a significant consolidation if not bullish correction.

Wednesday 3/25

German Ifo Business Climate (Mar.)
Forecast: 107.4
Previous: 106.8
The business climate indicator shows that overall mood of businesses remains rosy after a slide during the second half of 2014. But as we know, the euro will likely remain pressured unless we start seeing strong inflation that might guide the ECB to an earlier departure of QE.

US Durable Goods Orders m/m (Feb.)
Forecast: 0.2%
Previous: 2.8%
US Core Durable Goods Orders m/m (Feb.)
Forecast: 0.4%
Previous: 0.0%
core durable goods
(click to enlarge; source: forexfactory.com)
Here is another economic data point that should see a couple more months in the positive because we saw a dip during Q4 of 2014. We did see a rebound last month in both the headline and core readings. This month, the core reading is expected to rise, while the headline reading is expected to stall. The core reading is more important and see it grow a couple more month’s will be an encouraging  sigh for the FOMC to raise rates.

Thursday 3/26

UK Retail Sales m/m (Feb.)
Forecast: 0.4%
Previous: -0.3%
US Jobless Clams (last week)
Forecast: 295K
Previous: 291K
Jobless claims not as important anymore unless it starts climbing back above 300K and stays above. Otherwise, the FOMC’s attention is towards wage growth and inflation.

Friday 3/27

UK Final GDP q/q (Q4)
Forecast: 2.4%
Previous Estimate: 2.2%
Q3: 5.0%
Q4 is likely to be revised higher. A 2.4% annual growth is pretty slow, but the FOMC has acknowledged some flattening towards the end of 2014, and is still optimistic about 2015. We shouldn’t get much of a surprise here.

Fed Chairwoman Janet Yellen will be speaking about monetary policy at a Federal Reserve Bank Conference: “The New Normal for Monetary Policy” Maybe her dovish side shows up to further suppress USD strength. It might be a choppy run going forward until the interest rate hike this year, but the market will likely remain biased to being USD-bullish.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.