Key Fundamental Factors this Week (11/24 – 11/28)

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Key Fundamental Factors this Week (11/24 - 11/28)

The USD was mixed. The EUR fell at the end of the week when Draghi talked about more stimulus measures. The GBP was slightly stronger after the less-dovish-than-expected BoE meeting minutes. The JPY has been bearish but took back some of those in the second half of last week. The CAD ended the week with a surge after higher-than-expected inflation data. Let’s see what fundamental factors are in store for us this week.

SNB chairman, Thomas Jordan is due to speak on Sunday (11/23). Traders will be monitoring his comments for clues on the EUR/CHF floor of 1.20 that has been recently threatened. Is the SNB ready to intervene? If it is, we should see the EUR/CHF rebound.

Monday (11/24)

German Ifo Business Climate (November)
Forecast: 103
Previous: 103.2
german ifo business climate

(click to enlarge; source: forexfactory.com)

The business temperature in Germany has been falling as the country barely staved off recession in Q3. We will need a couple of gains in this index before it can give the EUR a boost. With the EUR already pressured, continual slide in business climate should keep EUR away from any material bullish correction.

Tuesday (11/25)

Kuroda is due to speak Tuesday. Traders have been surprised by more stimulus on top of the already unprecedented measures the BoJ has been taking. The BoJ Govenor is likely to defend these stimulus measures, and this should keep pressuring the JPY.

BoE Governor Mark Carney will speak in front of the Parliament’s Treasury Select Committee in London. Traders are expecting the BoE to be more dovish when it comes to forward guidance. The latest BoE inflation report showed lower growth and inflation forecasts, but the latest BoE meeting minutes didn’t show any dovish shift, because there was still the 2 dissenting votes to raise rates (instead of holding). The market is projecting a rate hike come Q2, 2014. Will Carney’s statements effect this expectation?

US Preliminary GDP annualized (Q3)
Forecast: 3.3%
Previous: 3.5%
us gdp q3 2014

(click to enlarge; source: forexfactory.com)

US GDP was at an annualized rate of growth of 4.2% in Q2. For Q3, the advanced estimate called for a 3.5% annualized reading. The second estimate – the preliminary reading – is forecast to be around 3.3%, a slight downward revision. If we get a reading in-line with forecast or lower, the USD might not have enough fuel from a fundamental perspective, to continue rallying. However, if the reading is above 3.5%, we should see continuing strength in the USD.

US Conference Board Consumer Confidence (November)
Forecast: 95.9
Previous: 94.5
consumer confidence nov. 2014

(click to enlarge; source: forexfactory.com)
Consumer confidence/sentiment has been climbing. The CB’s readings have reached the highest since Oct. 2007 when it was 95.6. Forecasts suggest November’s print will surpass that. Strong consumer confidence suggests domestic demand will sustain, paving the way for other fundamental factors such as retail sales or durable goods orders to shine as well.

Wednesday (11/26)

UK 2nd Estimate GDP q/q (Q3)
Forecast: 0.7%
Previous: 0.7%
Traders are sensitive to negative UK news these days, so if the second estimate shows a downward revision, lower than 0.7%, we should expect a GBP-sell-off. A positive reaction to data in-line or better than expected is not likely to last long unless it is significant like a reading of 1.0% or above.

US Durable Goods Orders m/m (October)
Forecast: -0.4%
Previous: -1.1% (revised from -1.3%)
Core Durable Goods Orders m/m (October)
Forecast: 0.5%
Previous: -0.1%
Jobless Claims 
Forecast: 287K
Previous week: 291K
Personal Spending m/m (October)
Forecast: 0.4%
Previous: -0.2%
Chicago PMI (November)
Forecast: 63.1
Previous: 66.2
Revised UM Consumer Sentiment (November)
Forecast: 90.2
Previous: 89.4
New Home Sales annualized (October)
Forecast 471K
Previous: 467K
Pending Home Sales m/m (Oct.)
Forecast: 0.9%
Previous: 0.3%

There is a slew of US data coming out on Wednesday ahead of Thanksgiving. These are all second-tier economic data. As long as US data does not start to slide in Q4, USD should remain strong. The forecasts for the above data set suggest that data has been upbeat in October and November, so we shouldn’t expect any significant impact on the USD other than nudging it along its bullish path.

Thursday (11/27) Thanksgiving Holiday in the US

German Prelim CPI m/m (November)
Forecast: 0.0%
Previous: -0.3

Inflation is expected to be flat after a dip. A reading above 0.0% can help the EUR find some temporary support, but we need a few readings closer to 0.5% before alleviating the concern of low inflation. Low inflation adds weight to ECB’s consideration of QE.

Friday 11/28

Eurozone CPI Flash Estimate y/y (November)
Forecast: 0.3%
Previous: 0.4%
eur inflation cpi y/y nov 2014

(click to enlarge; source: forexfactory.com)
Core CPI Flash Estimate y/y (November)
Forecast: 0.7%
Previous: 0.7%

Inflation expectation remains low. Several months ago, Draghi projected the then 0.5% y/y CPI reading to be the bottom. However, it has come down to 0.3% in July and August, rebounded to 0.4% in September, and forecast to be 0.3% again in October. This is way below the 2.0% target and shows no indication of moving towards it anytime soon. A reading in-line with estimate should keep the euro pressured. It will take several strong inflation readings among other data sets to turn the Euro around.

CAN GDP m/m (Sept.)
Forecast: 0.4%
Previous: -0.1%
The Canadian economy is expected to have grown in September after stalling in August with a -0.1% reading. Canadian data have not been consistent, and the CAD remains pressured due to its correlation with commodity prices, especially oil, which has been tanking.

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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.