Key Fundamental Factors this Week (1/12-1/16)

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Key Fundamental Factors this Week (1/12-1/16)

Last week, we saw subdued inflation data out of Europe. The Bank of England is also concerned with low inflation. In the US, there were more than expected jobs added in December but hourly earnings declined. In Canada, the economy shed instead of adding jobs in December. Let’s see what is in store for us this week in terms of fundamental factors.

Tuesday (1/13)

UK CPI y/y (Dec)
Forecast: 0.7%
Previous: 1.0%
uk inflation dec.
(click to enlarge; source: forexfactory.com)

Inflation and inflation expectations continue to slide. Last week, BoE Gov. Mark Carney warned that inflation was likely to drop below 1.0% on an annual basis. If the CPI report this week is in-line with forecast, and CPI growth does fall below 1.0%, Carney will have to write his first letter to the treasury, explaining the situation.

US JOLTS Job Openings (Nov.)
Forecast: 4.91M
Previous: 4.83M
Job openings are increasing along with the increase in job numbers. However, wage growth is the main issue at the moment, so this data point might not have much impact on the USD outside of the near-term.

Wednesday 1/14

US Retail Sales m/m (Dec.)
Forecast: 0.2%
Previous: 0.7%
Retail sales are expected to rise only 0.2% in December. According to consumer reports, the shopping season this year started earlier than usual and this may be a trend as retailers are trying to start discounts earlier, before black Friday and super Saturday. The point – the seemingly low reading of 0.2% is not that bad, given that November was a strong month already.
Core Retail Sales m/m (Dec.)
Forecast: 0.1%
Previous: 0.5%

Thursday 1/15

AUS Employment Change (Dec.) 
Forecast: 5.3K
Previous: 42.7K
aus employment change
(click to enlarge; source: forexfactory.com)
AUS Unemployment Rate (Dec.)
Forecast: 6.3%
Previous: 6.3%
Employment data in Australia has been a bit volatile, but it has been mostly positive in 2014. The AUD is very vulnerable at the moment, sliding to record lows against the NZD. A negative reading, or even a near-flat reading could be bearish on the AUD especially if it is consolidating. A strong reading might not have much impact except for guiding Aussie into some short-term consolidation against the Kiwi.

US PPI m/m (Dec.)
Forecast: -0.3%
Previous: -0.2%
Prices at the factory gate has been subdued in the second half of 2014, mostly thanks to falling energy prices. This contributes to the general issue of low inflation holding back the FOMC’s interest rate hike. Therefore the negative reading might slow down the USD’s run, especially if the core reading remains flat.
US Core PPI m/m (Dec.)
Forecast: 0.2%
Previous: 0.0%
US Jobless Claims:
Forecast: 299K
Previous week: 294K
Philly Fed Manufacturing Index (Jan.)
Forecast: 20.3
Previous: 24.5
philly fed Jan. 2015
(click to enlarge; source: forexfactory.com)
We have seen a slight leveling in manufacturing data in Q4 2014. The Philly region is still growing (a reading above 0), but the pace continues to ease, adding to the prospect of some USD-consolidation.

Friday 1/16

US CPI m/m (Dec.)
Forecast: -0.3%
Previous: -0.3%
us cpi m/m dec. 2014
(click to enlarge: source: forexfactory.com)
Core CPI m/m (Dec.)
Forecast: 0.1%
Previous: 0.1%
Falling oil prices are  helping consumers at the pump. The headline reading is negative, but this is so in other countries as well. If the core reading is flat or negative however the USD might falter against other currencies.

Prelim UM Consumer Sentiment (Jan.)
Forecast: 94.2
Previous: 93.6
um sentiment Jan. 2015
(click to enlarge: source: forexfactory.com)
In 2014, improving consumer sentiment has become a new normal as we can see in the graph above. It is returning to levels before the financial crisis. This underpins another year of strong recovery in 2015 as far as domestic demand is concerned.

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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.