Key Fundamental Factors this Week (2/16-2/20)

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Key Fundamental Factors this Week (2/16-2/20)

Last week, poor Australian jobs data dragged down the Aussie further. The BoE inflation report revealed slightly better growth forecast, although the inflation concern remains. The pound was resilient. US retail sales data disappointed, and the USD pared recent gains. Let’s take a look at what fundamental factors are in store for us this week.

Monday (2/16)

NZ Retail Sales q/q (Q4)
Forecast: 1.3%
Previous: 1.5%

Japan Prelim GDP q/q (Q4)
Forecast: 0.9%
Previous: -0.5%
japan gdp q4
(click to enlarge; source: forexfactory.com)
In Q4, did Japan climb out of its recession ? Preliminary forecasts suggest it did. Economic data usually don’t impact the JPY. But a return to growth would be a key moment for the Japanese economy this year, and can signal to the BoJ not to extend stimulus further. Therefore, while the Japanese might not be bullish, it might be resilient and hold in consolidation if the GDP reading is in-line with forecasts.

Tuesday (2/17)

RBA Monetary Policy Minutes will reveal the banks thinking behind its recent rate cut that brought the official cash rate (OCR) to 2.25% from 2.50%. The AUD has been a weakling and it is hard to see how the minutes will be able to change that. AUD should remain bearish unless the RBA minutes clearly states that there will be no more rate cut for a period of examination.

UK CPI y/y (Jan.)
Forecast: 0.3%
Previous: 0.5%
UK Inflation
(click to enlarge; source: forexfactory.com)
Low inflation will keep the door open for a rate cut even though the BoE gave us a rosier outlook on growth last week. Remember the reason for that outlook is due to oil prices which is volatile. Therefore, the positive nature of that inflation report is fundamentally unsound. Inflation however have anchored down clearly as seen in the bar chart above. A reading of 0.3% or lower should limit the pound’s recent gains against the USD, JPY, EUR and other majors.

German ZEW Economic Sentiment (Feb.)
Forecast: 56.2
Previous: 48.4
Eurozone ZEW Economic Sentiment (Feb.)
Forecast: 51.3
Previous: 45.2
It will be good to see economic sentiment return to above 50 readings in Germany and the Eurozone. Slowly, we are starting to see the euro become resilient against the USD. Data have been bottoming at the beginning of the year. Yes, QE should remain a drag on the euro, and limit its bullish outlooks to the short-term. Economic sentiments being in growth should help euro get into a short-term bull run.

NZ GDT Price Index (bi-weekly)
Previous: 9.4%
gdt prices
(click to enlarge; source: forexfactory.com)
Dairy prices have been declining throughout 2014, but seems to be picking up in recent weeks. This should help it gain mostly against the Aussie, and we are indeed seeing AUD/NZD head towards its record lows, with risk of breaking lower.

Bank of Japan Monetary Policy Statement and Press Conference: The BoJ doesn’t usually make any market moving statements. But we should get a sense whether the bank sees any end to its stimulus program in sight. Any mention of that should give the JPY a boost. Otherwise, we should expect a secular JPY-bear market.

Wednesday (2/18)

UK Average Earnings Index 3m/y (Q4) 
Forecast: 1.7%
Previous: 1.7%
Claimant Count Change
Forecast: -25.2K
Previous: -29.7K
BoE Bank Rate Vote:
Forecast: 0-0-9
Previous: 0-0-9
Jobs data seem to be improving, and earnings might have picked up a decent amount in Q4. Readings in-line with estimates should help the GBP edge higher if it is no already in bullish correction. The BoE’s vote is expected to be a unanimous one for holding rates as well as the asset purchase program.

US PPI m/m (Jan.)
Forecast: -0.4%
Previous: -0.3%

US FOMC Meeting Minutes: The Fed’s most recent meeting suggested that it is still on pace to raise rates by mid-year. Will the minutes add any surprises? Not likely. The market seems to have exhausted its USD-fuel, so maybe if the meeting minutes continue to suggest the intent of the FOMC to raise rates, the greenback might make another run.

Thursday 2/19

Jobless Claims
Forecast: 305K
Previous: 304K
Philly Fed Manufacturing Index (Feb.)
Forecast: 8.8
Previous: 6.3

Friday 2/20

German Flash Manfuacturing PMI (Feb.)
Forecast: 51.8
Previous: 50.9
flash manufacturing pmi
(click to enlarge: source: forexfactory.com)
Eurozone Flash Manufacturing PMI (Feb.)
Forecast: 51.6
Previous: 51.0
Manufacturing data in the Eurozone have been back in growth mode (like the ZEW economic sentiment), but of course its not much to cheer about yet. It seems like around the time the ECB announced QE, data has started to round out a bottom. This means, the euro is going to be pressured, but the positive trend of data should keep it from plunging.

UK Retail Sales m/m (Jan.)
Forecast: -0.1%
Previous: 0.4%

CAN Core Retail Sales m/m (Jan.)
Forecast: -0.7%
Previous: 0.7%
CAN Retail Sales m/m (Jan.)
Forecast: -0.3%
Previous: 0.4%

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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.