Key Fundamental Factors this Week (3/2 – 3/6)

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Key Fundamental Factors this Week (3/2 - 3/6)

As we start a new week and a new month, we will see some key fundamental factors out of the UK (BoE), Eurozone (ECB), Australia (RBA), Canada (BoC), and the US (NFP jobs data). Let’s take a look at these and many other key event risks for the forex market this week.

Monday (3/2)

UK Manufacturing PMI (Feb.)
Forecast: 53.5
Previous: 53.0
uk manufacturing pmi
(click to enlarge; source: forexfactory.com)
A reading above 50 reflects expansion. This indicator of growth in the manufacturing sector has been declining throughout 2014, but seems to have stabilized. Among other economic releases, UK has been showing some resilience in the growth and inflation. The BoE will likely NOT be considering a rate cut, and will start planning for a rate hike again. Here a reading above 53.0 would add weight to this scenario.

Eurozone CPI Flash Estimate y/y (Feb.)
Forecast: -0.5%
Previous: -0.6%
eurozone cpi y/y
(click to enlarge; source: forexfactory.com)
Core CPI Flash Estimate y/y (Feb.)
Forecast: 0.6%
Previous: 0.6%
The annual inflation rate was negative for a couple months and is expected to be negative again in February. The drop in oil prices as well as a lull in the European economy have contributed to negative headline inflation. Taking out the volatile items such as energy, the core reading is still positive, but low. Remember, the ECB wants to target 2.0%, and we’ll see pressure towards higher inflation as the ECB starts to implement QE in March. The sooner the headline reading climbs back above 0 and towards 2%, the more less room the ECB will have to continue its stimulus measures.

US ISM Manufacturing PMI (Feb.)
Forecast: 53.4
Previous: 53.5
us ism manuf
(click to enlarge; source: forexfactory.com)
Manufacturing growth has been sliding in the past 3 months and casts doubt on the FOMC’s optimism about the economy at the beginning of the year. As long as the reading is above 50, it shows growth and should not stir the pot.

Tuesday (3/3)

RBA Cash Rate and Statement
Forecast: 2.00%
Previous: 2.25%
RBA rates
(click to enlarge; source: forexfactory.com)
The Reserve Bank of Australia is once again expected to cut its official cash rate to 2.00% from 2.25%. It has been 2.50% throughout 2014, but the RBA is now reviving its dovish mode. We should see further pressure in the AUD, especially against the USD.

Mark Carney is due to speak before the Treasury Select Committee. The British MPs will be probing the BoE governor about a forex scandal still unraveling. Here’s an article from the independent about this.

CAN GDP m/m (Jan.)
Forecast: 0.1%
Previous: -0.2%
Has Canada avoided 2 straight months of contraction? Economists think so, but the forecast is still pretty much flat and out side of a technical correction, or intrasession reaction to a positive GDP reading, the CAD should continue to be pressured against the USD.

Wednesday (3/4)

AUS GDP q/q (Q4)
Forecast: 0.7%
Previous: 0.3%
aus gdp q4 2014
(click to enlarge; source: forexfactory.com)
It will be interesting to see if both the RBA decision and GDP will come out as expected. After a rate a cut, a rebound in GDP in Q4 would show the RBA might not need to continue its dovish mode and could help the AUD stabilize if it has been indeed bearish this week.

UK Services  PMI (Feb.)
Forecast: 57.6
Previous: 57.2
We saw that manufacturing stabilized. Growth in the services sector did drift lower in 2014, but not significantly. (From highs around 60 to lows around 56). This shouldn’t be much of an impact, but it adds another reason for the BoE to start turning hawkish.

US ADP Non-Farm Employment Change (Feb.)
Forecast: 219K
Previous: 213K
The ADP jobs data has not really been much of an impact. As always, the NFP data on Friday will trump any reaction to this precursor data, unless the reading falls below 200K, or climbs above 250K.

CAN BoC Overnight Rate and Statement:
Forecast: 0.75%
Previous: 0.75%
BoC interest rate
(click to enlarge; source: forexfactory.com)
The BoC is coming off a cut rate in its last meeting from 1.00% to 0.75%. The economy is still stalling and inflation is low, but the BoC might want to take a break first. However, if it does cut rates, expect a brief and sharp decline in the CAD. The statement is expected to be dovish and keep further rate cuts on the table. But if the bank believes downside to the economy is limited and that it should no longer need another rate cut, the CAD could be supported for at least an intra-week rebound.

ISM Services PMI (Feb.)
Forecast: 56.5
Previous: 56.7

Thursday (3/5)

BoE Official Bank Rate
Forecast: 0.50%
Previous: 0.50%
BoE Asset Purchase Program:
Forecast: 375B
Previous: 375B
The Bank of England is expected to be in a holding pattern. It has retreated from its rate hike considerations in 2014 and may even be considering a rate cut with inflation so low. We have recently see some bottoming of growth and inflation, so maybe the BoE will get back to being hawkish. The market will be sensitive to language that points the central bank back into the direction of a rate hike. It has been building some tension in the GBP. A disappointment would be a statement that has a rate cut on the table. That would pare a lot of the gains GBP had on the USD in February.

ECB Minimum Bid Rate and Press Conference:
Forecast: 0.05%
Previous: 0.05%
The ECB is expected to roll out its QE measures. The market will be keen to whether there has been any change in tone regarding QE. Will it still continue through Sept. 2016? Are there any forward guidance already? Any language that includes provisions of shortening the stimulus program should be seen as positive for the Euro. Otherwise, if its business as usual, the euro should continue to be pressured especially if it has been consolidating throughout the week.

US Jobless Claims
Forecast: 319K
Previous: 313
Another week above 300K. If we get another 1 or 2, the market will start to show concern. The market will be more concerned about Friday’s NFP report than the jobless claims data this week.

CAN Ivey PMI (Feb.) 
Forecast: 46.2
Previous: 45.4
The Ivey PMI falling below 50 shows that business conditions are deteriorating in Canada. This week’s reading should continue to pressure the CAD, unless it has already been falling sharply after the expected BoC rate cut.

Friday (3/6)

CAN Building Permits m/m (Jan)
Forecast: 5.5%
Previous: 7.7%
CAN Trade Balance (Jan.)
Forecast: 0.3B
Previous: -0.6B

US NFP Employment Change (Feb.)
Forecast: 241K
Previous: 257K
US NFP FEb 2015
(click to enlarge; forexfactory.com)
US Employment Rate:
Forecast: 5.6%
Previous: 5.7%
US Trade Balance: 
Forecast: -41.6B
Previous: -46.6B
Jobs data has been decent. The expected reading of 240K would still be a sign of an improving labor market even though it would be lower than the previous. In order for the USD to snap out of its doldrum of late, a reading close to or about 300K would be needed. However, if other central banks are dovish this week, simply a reading above last month’s should return some strength in the USD going into the upcoming week, especially if the USD has been on its back foot all week.

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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.