Key Fundamental Factors this Week (12/15-12/19)

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Key Fundamental Factors this Week (12/15-12/19)

Last week was a light one in terms of the number of significant fundamental factors that came out. The USD pared some gains. The Japanese Yen fought back a little, but remains pressured. The AUD continued to fall.

It turns up a bit this upcoming week. Let’s take a look at what is in store for us.

Monday 12/15

Australia’s Treasury will release its Mid-Year Economic and Fiscal Outlook. Let’s see how concerned the government is about the economy and whether it will also cite an overvalued AUD.

RBA Monetary Policy Meeting Minutes will be released. There was no change in interest rate or tone of the recent RBA statement. If members start discussing a rate cut, then the AUD might be in trouble.

US Empire State Manufacturing Index (Dec.)
Forecast: 12.1
Previous: 10.2

Tuesday 12/16

German Flash Manufacturing PMI (Dec.)
Forecast: 50.4
Previous: 49.5 (revised from 50.0)
German Flash Services PMI (Dec.)
Forecast: 52.6
Previous: 52.1
Eurozone Flash Manufacturing PMI (Dec.)
Forecast: 50.5
Previous: 50.1 (revised from 50.4)
Eurozone Flash Services PMI (Dec.)
Forecast: 51.6
Previous: 51.1(revised from 51.3)

Manufacturing and Services PMIs in the Eurozone and Germany are expected to pick up in December. We saw a revision of German Manufacturing PMI for November that showed contraction. If these PMIs do not rebound like expected, we can anticipate bearish pressure on the euro, which was resilient last week.

BoE Governor Carney will hold a press conference to discuss the bank’s Financial Stability Report, which would have been released on Tuesday.

UK CPI y/y (Nov.)
Forecast: 1.2%
Previous: 1.3%
uk cpi dec. 2014
(click to enlarge; source: forexfactory.com)

The Bank of England lowered its inflation and growth forecasts a couple of months ago. Negative inflation pressure is going to push back the BoE’s readiness for a rate hike, which is projected towards the end of 2015 to early 2016. If November’s inflation number rises instead, we might see some resilience in the GBP at least in the short-term./

German ZEW Economic Sentiment (Dec.)
Forecast: 19.8
Previous: 11.5
german economic sentiment
(click to enlarge; source: forexfactory.com)
Eurozone ZEW Economic Sentiment (Dec.)
Forecast: 20.1
Previous: 11.0

Economic Sentiment has been sliding but rebounded in November. If we get another rise in December, the EUR’s resilience last week is “justified”. This is to say, if the data does not rise and remains close to the previous, we might see euro’s short-term bullish attempt lose steam.

CAN Manufacturing Sales m/m (Oct.)
Forecast: -0.4%
Previout: 2.1%

US Building Permits (monthly data annualized) (Nov.)
Forecast: 1.06M
Previous: 1.08M

Wednesday 12/17

UK Average Earnings Index 3m/y (Oct.)
Forecast: 1.3%
Previous: 1.0%
The ability to increase earnings will be needed for the BoE to raise rates, but if this reading falls back below 1.0%, we can expect some GBP-weakness.

UK Claimant Count Change (Nov.)
Forecast: -19.8K
Previous: -20.4K
uk claimant count nov. 2014
(click to enlarge; source: forexfactory.com)
The more negative the Claimant Count Change reading, the better. It reflects the number of people getting off unemployment benefit.

BoE Meeting minutes

CAN Wholesale Sales m/m (Oct.)
Forecast: 0.9%
Previous: 1.8%

US CPI m/m (Nov.)
Forecast: -0.1%
Previous: 0.0%
Core CPI m/m (Nov.)
Forecast: 0.1%
Previous: 0.2%
Inflation in November is expected to be essentially flat or slightly lower, with the core reading slightly above 0. With this type of inflation reading, the USD will have a tough time continuing its recent strength. In fact, it consolidated last week, and the inflation data might keep it in consolidation. Now, if the headline reading is above 0.0%, we might see some further USD-strength especially if it  has been giving back its recent gains.

FOMC Decision/Statement/Economic Projections/Press Conference

Will Yellen reaffirm the mid-2015 projection for raising interest rates? There is also a release of economic projections which will reveal FOMC’s perception of its readiness to raise rates. Most likely, it will reiterate cautiously positive outlook, with concerns on inflation and wage growth. If there is nothing new from the FOMC statement and the economic projections are essentially in-line with previous projections, the USD will consolidate because the market has already priced in the mid-2015 projection.

NZ GDP q/q (Q3)
Forecast: 0.7%
Previous: 0.7%

Thursday 12/18

German Ifo Business Climate (Dec.)
Forecast: 105.6
Previous: 104.7
german ifo dec.
(click to enlarge; source: forexfactory.com)
Are things picking up again? Ifo Business climate improved in November after a 7-month slide. Will the December reading extend the rebound? or disappoint and put the euro back under pressure?

UK Retail Sales m/m (Nov.)
Forecast: 0.3%
Previous: 0.8%

US Jobless Claims:
Forecast: 297K
Previous: 294K

Philly Fed Manufacturing Index (Dec.)
Forecast: 26.3
Previous: 40.8

Friday 12/19

BoJ Monetary Policy Statement/Press Conference
The Bank of Japan has been putting forth policy that has the market selling the Japanese Yen. This is unlikely to change although in the short-term the JPY could be oversold, unless the BoJ continues to threaten more action, in which case there would be an acceleration of JPY-selling.

CAN CPI m/m (Nov.)
Forecast: -0.2%
Previous: 0.1%
Core CPI m/m (Nov.)
Forecast: 0.1%
Previous: 0.3%
CAN Retail Sales m/m
Forecast: -0.4%
Previous: 0.8%
Core Retail Sales m/m
Forecast: 0.2%
Previous: 0.0%

Canadian data rounds out the week. The USD/CAD has been making new highs on the year. This week, we should compare US CPI with CAN CPI for some clues on whether USD/CAD has more steam to push higher.

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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.