Key Fundamental Factors this Week (2/23-2/27)

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Key Fundamental Factors this Week (2/23-2/27)

It was a relatively quiet week for the majors. Let’s take a look at what is in store for us in the upcoming week in terms of fundamental releases.

Monday 2/23

German Ifo Business Climate (Feb.)
Forecast: 107.4
Previous: 106.7
german ifo business climate feb. 2015
(click to enlarge: source: forexfactory.com)
Business sentiment in Germany has been improving and is slated for the 4th month of improvement in a row. This has occurred just before and is happening just after the announcement of QE. Continuing improvement in Germany’s business climate might help support the euro.

US CB Consumer Confidence (Feb.)
Forecast: 99.6
Previous: 102.9
Janet Yellen to testify before the Senate Banking Committee. Traders will continue to monitor Yellen’s language toward the upcoming rate hike, which many believe will happen in mid-year. Are growth and inflation projections in-line with what the FOMC needs to see in order to raise rates? What about wage inflation? Does the FOMC see any upside to wages? If it does, there is a good chance it is planning to follow through with the rate hike. This will be a 2-day event that will end Wednesday (2/25).

Wednesday 2/25

US New Home Sales (Jan.) annualized
Forecast: 477K
Previous: 481K

Mario Draghi will speak before the European Parliament. The market has been keeping a bottom on the euro. However, Draghi will likely remind the market about QE, which the ECB will be implementing in March. If the euro is consolidating or in bullish correction, Draghi will likely drag it back down, unless he is already starting to give us forward guidance on ending QE based on certain economic measures.

Thursday 2/26

UK second estimate of GDP q/q (Q4 2014)
Forecast: 0.5%
First Estimate: 0.5%
Previous (Q3): 0.7%

EUR Targeted LTRO
Previous:  129.8B
If this number starts to decline, we should be looking for the euro to continue its price bottoming action in the EUR/USD and perhaps consolidate in the EUR/GBP.

CAN CPI m/m (Jan.)
Forecast: -0.3%
Previous: -0.7%
Core CPI m/m (Jan.)
Forecast: 0.1%
Previous: -0.3%
can core cpi
(click to enlarge: source: forexfactory.com)
Inflation has been falling around the world due to lower oil prices. But for Canada, core inflation has also been declining as seen in the chart above. If core inflation continues to be negative, the CAD should remain pressured, and the USD/CAD should be able to continue its bullish trend, especially if US inflation data coming out at the same time is stronger.

US CPI m/m (Jan.)
Forecast: -0.6%
Previous: -0.4%
Core CPI m/m (Jan.)
Forecast: 0.1%
Previous: 0.0%
us cpi jan.
US inflation has been dragged down by declining oil prices like in many other countries. Its core inflation has remained flat or nearly flat. The USD has stalled recently, and a negative core reading might drag it further in the short-term. A reading above 0.1% might give it a little nudge, but it really depends on the momentum following Janet Yellen’s testimony.

US Jobless Claims
Forecast: 285K
Previous: 283K

Friday 2/27

German Prelim CPI m/m (Feb.)
Forecast: 0.6%
Previous: -1.1%
Inflation has been a concern, but has taken a backseat to Greek liquidity issues in the Eurozone. If February’s CPI reading for Germany indeed climbs back to 0.6%, we will need another month of strong inflation reading to start shedding those inflation concerns. A reading that is flat or negative can continue to drag the euro because it suggests room in terms of size and time for stimulus measures.

US Prelim GDP q/q (Q4) annualized
Forecast: 2.1%
Advanced Estimate: 2.6%
Q3: 3.9%
us gdp q4
(click to enlarge; source: forexfactory.com)
GDP data for Q4 is seen to have been slightly lower than the advance estimate. This might cast some doubts on the FOMC’s positive assessment of the economy going forward in 2015. If Q4 GDP can hold above 2.0% we should be fine. But a reading that is revised down below 2.0% might pressure the USD further and might push its short-term correction into a medium-term correction.

Previous Post by Author: Poor CAN Data Pushing USD/CAD Towards Triangle Resistance

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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.