Key Fundamental Factors this Week (11/17 – 11/21)

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Key Fundamental Factors this Week (11/17 - 11/21)

Last week, we had some slightly disappointing fundamental data from the US and saw the USD loss some of its recent gains. However, the Japanese yen was even weaker. The pound was softer after the BoE’s inflation report. Germany’s GDP data showed it stayed out of recession, and the euro had a slight rebound against the majors. Let’s take a look at what fundamental factors might shake the markets this week.

Monday 11/17

Japanese Prelim GDP q/q (Q3)
Forecast: 0.5%
Previous: -1.8%
Even though GDP data is important, the market rarely reacts to Japanese economic data. But, if Japan’s economy is flat or contracts again, we should be seeing another round of JPY-selling.

ECB President Mario Draghi Testifies before the Committee on Economic and Monetary Affairs. The market will be looking at clues on how the ECB is gearing up for QE, or whether it is trying to hold out.

UK CPI y/y (October)
Forecast: 1.2%
Previous: 1.2%
uk cpi Oct 2014

(click to enlarge; source: forexfactory.com)

The annual CPI inflation has fallen below the 2.0% target this year has not shown any signs of picking up. The 1.2% reading is the lowest since September 2009’s 1.1% print. A reading above 1.5% might be needed to instill any resilience in the GBP, which has been sliding since last week’s BOE quarterly inflation report. A reading below 1.2% can add weight to the decline.

Tuesday (11/18)

German ZEW Economic Sentiment (November)
Forecast: 0.9%
Previous: -3.6%
german zew sentiment

(click to enlarge; source: forexfactory.com)

Germany has been in focus. The GDP data last week was in-line with expectations but at 0.1% it should not instill any confidence in a turnaround just yet. Nonetheless we saw some resilience in the euro and it gained against most majors. If we see sentiment climb back up to positive readings, the euro has a chance to remain neutral until the next ECB monetary policy decision approaches. If the reading is negative again, we should see the euro slide back into the bearish mode.

Eurozone ZEW Economic Sentiment (November)
Forecast: 4.3%
Previous: 4.1%

US PPI m/m (October)
Forecast: -0.1%
Previous: -0.1%
us ppi m/m oct 2014

(click to enlarge; source: forexfactory.com)

Core PPI m/m (October)
Forecast: 0.2%
Previous: 0.0%
We are expected to see another slight dip in producer prices in October. This might be reason for the market to continue consolidating USD’s gains. If we see a reading above 0, the USD might shift back to its bullish mode at least in the short-term, during this week.

NZ GDT Price Index
Previous: -0.3%
gdt price index

(click to enlarge; source: forexfactory.com)

Part of why the New Zealand Dollar is weak is because dairy prices have been falling as shown by the GDT price index. If we get a couple of months or a handful of releases showing positive readings (data released twice a month), we might start to see resilience in NZD, especially if other commodity prices also stabilize.

Wednesday (11/19)

Bank of Japan Monetary Policy Decision and Statement is due. Last time the BoJ surprised with more stimulus measures. What is the bank’s attitude toward its current stimulus plans? Anything the bank says is likely to soften the JPY more because it is likely going to defend its action by reiterating the reasons for more stimulus.

Bank of England Meeting Minutes is due. There should be some volatility for the GBP especially if the minutes show any members of the BoE pushing back when they think the interest rate should be increased especially with Weale and McCafferty, who have been pushing for an imminent rate hike.

US Building Permits (October)
Forecast: 1.04M
Previous: 1.02M
US Housing Starts (October)
Forecast: 1.03M
Previous: 1.02M

FOMC Meeting Minutes are due. How will the FOMC follow an October meeting that ended QE and was optimistic about job growth? At the end of the day, the market wants to know if the FOMC is really committed to a mid-2015 rate hike. If we get affirmation that this is the current forward guidance, we might see the USD take back some gains. But if the USD has already strengthened during the week, a hawkish FOMC might only help push it a little further because the market would have likely been pricing in a hawkish FOMC minutes.

Thursday (11/20)

German Flash Manufacturing  PMI (November)
Forecast: 51.5
Previous: 51.4(revised down from 51.8)
Eurozone Flash Manufacturing PMI (November)
Forecast: 50.9
Previous: 50.6
Some stabilization of economic data like forecast of manufacturing PMIs suggests might help the EUR stabilize. But if data misses forecasts, and the EUR has already made a bullish correction, look out for a bearish continuation attempt.

UK Retail Sales m/m (October)
Forecast: 0.4%
Previous: -0.3%

US CPI m/m (October)
Forecast: -0.1%
Previous: 0.1%
us cpi oct.

(click to enlarge; source: forexfactory.com)

Core CPI m/m (October)
Forecast: 0.2%
Previous: 0.1%
If the headline inflation falls to -0.1% as expected we might see some further consolidation of the USD unless it has already been faded ahead of the release. Inflation, especially wage inflation is needed for the FOMC to stay on its mid-2015 rate hike schedule.

Jobless Claims:
Forecast: 286K
Previous week: 290K
Philly Fed Manufacturing Index
Forecast: 18.9
Previous: 20.7
Existing Home Sales (October)
Forecast: 5.16M
Previous: 5.17M

Friday 11/21

CAN CPI m/m (October)
Forecast: -0.3%
Previous: 0.1%
Core CPI m/m (October)
Forecast: 0.2%
Previous: 0.2%

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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.