Key Fundamental Factors this Week (1/26-1/30)

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Key Fundamental Factors this Week (1/26-1/30)

The last couple of weeks were full of central bank moves and surprises that caused volatility in many currency prices not seen in a while. 2 Weeks ago, the CHF shot up after the SNB abandoned the cap on the euro. However, the SNB also lowered its libor rate to a negative range which should limit the flow into the swissie.

Last week, the BoE minutes revealed that all votes were to hold rates, a more dovish count than the previous five 2-7 vote (with 2 voting to raise rates). The BoJ didn’t change its stance on its current stimulus. The BoC surprised with a rate cut and sent the CAD lower across the board. Finally, the ECB delivered as many expected, and the euro continued to bleed.

What will be in store for us this week in terms of key fundamental factors?

Monday 1/26

German Ifo Business Climate (Jan.)
Forecast: 106.7
Previous: 105.5
Business climate is actually improving and if the reading for January is going to be in-line with forecast, it would make it the 3rd straight month of uptick. This can be attributed to expectation of QE, which ECB said it will implement starting in March.

Tuesday 1/27

AUS NAB Business Confidence (Jan.)
Previous: 1
nab business confidence
(click to enlarge; source: forexfactory.com)
Business Confidence in Australia is falling and is essentially expected to have been flat in January. The RBA will soon be forced to consider cutting rates, especially with so many central banks turning dovish again, and inflation expectation going down.

UK Prelim GDP q/q (Q4 2014)
Forecast: 0.6%
Previous: 0.7%
uk gdp q4 2014
(click to enlarge; source: forexfactory.com)
Growth has been stalling in the UK and is expected to have ticked down again in Q4 of 2014. A surprise would be a reading above 0.7% and that might give the GBP a boost since its continued decline has to do with the BoE becoming more dovish. The BoE’s more dovish stance has to do with lower inflation and growth outlook, so if growth stops falling, the GBP might get some bids.

US Durable Goods Orders m/m (Dec.)
Forecast: 0.6%
Previous:-0.9%
Core Durable Goods Orders m/m (Dec.)
Forecast:0.6%
Previous: -0.7%
Durable goods orders data have been volatile month to month, but has been clearly subdued towards the end of Q3 and through Q4. Continuing weakness can give the market doubts on whether the FOMC will be able to raise rates in mid-2015.

Conference Board Consumer Confidence (Jan.)
Forecast: 95.7
Previous: 92.6
cb consumer confidence
(click to enlarge; source: forexfactory.com)
Consumer confidence is expected to have rebounded in January into highs not seen since Oct. 2007. This might not have much impact on the USD because the market is having doubts about whether the FOMC will raise interest rates in mid-2015 with all these CBs going the other way.

New Home Sales (Dec. annualized)
Forecast: 452K
Previous: 438K

Wednesday 1/28

AUS CPI q/q (Q4 2014)
Forecast: 0.3%
Previous: 0.5%
aus cpi q/q
(click to enlarge; source: forexfactory.com)
Inflation is declining and thus putting pressure on the RBA to consider cutting rates.

FOMC Monetary Policy Statement and Press Conference:
This will be a very important FOMC meeting. The market started the year bullish on a rate hike by mid-2015. Some projections were even earlier ie. April. However, the events and data in the past 2 weeks have made this projection shaky. First of all, inflation is declining. You might say, it is declining in most developed countries right now because of oil price. Well, they are implementing stimulus measures and cutting rates. Will the FOMC be able to still consider raising rates when all these CBs are going the other direction? If the market smell hesitation, doubt, about the mid-2015 projection, the USD might give back some of its recent gains and enter a period of consolidation if not bearish mode.

Thursday 1/29

RBNZ Monetary Policy Statement:
The RBNZ has not been making any splash, but don’t be caught surprised if it starts to sound dovish, and consider more stimulative monetary policy environment. Any hint of possible rate cut will be a drag on the NZD.

NZ Trade Balance (Dec.)
Forecast: -70M
Previous: -213M

German Prelim CPI m/m (Jan.)
Forecast: -0.8%
Previous: 0.0%
Inflation is declining quickly due to energy prices. The euro will continue to be pressured if the January CPI reading is indeed -0.8%. If it is above 0.0% however, the euro might get a break finally, but this is very unlikely.

US Jobless Claims
Forecast: 301K
Previous Week: 307K

Friday 1/30

EU CPI Flash Estimate y/y (Jan.)
Forecast: -0.5%
Previous: -0.2%
EU Core CPI Flash Est. y/y (Jan.)
Forecast: 0.6%
Previous: 0.7%
The forecast of -0.5% is due to the continuing decline in oil prices. However, even the core reading of 0.6% is low for annual inflation rate. This inflation concern however won’t be a surprise, and should have been somewhat addressed by ECB’s announcement of QE.

CAN GDP m/m (Nov.)
Forecast: -0.1%
Previous: 0.3%
can gdp
(click to enlarge; source: forexfactory.com)
You can bet that the BoC was saw that growth has been sliding and that the economy could have been negative in November. The rate cut last week is indication of lowered growth projection, so the market should have been pricing in a poor GDP reading this week. A reading above 0.0% therefore might give the CAD some support at least in the intra-session time-frame.

US Advanced GDP q/q
Forecast: 3.1%
Previous: 5.0% (revised up from 3.5%)
usd gdp (Q4)
(click to enlarge; source: forexfactory.com)
The 3.1% forecast for GDP is not bad, but definitely not impressive and won’t be making the case for a mid-2015 rate hike. Let’s first see what the FOMC says.

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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.