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The Week Ahead: Stats, Geopolitics and Monetary Policy Put the USD, GBP and Kiwi Dollar in Focus

Bob Mason

On the Macro

It’s a relatively busy week ahead on the economic calendar, with 45 stats to monitor. In the previous week, 64 stats had been in focus.

For the Dollar:

It’s a relatively busy week ahead on the economic calendar.

In a quiet start to the week, December JOLTs job openings are in focus on Monday. While forecasts are Dollar positive, expect quit rates to have an impact. Last Friday’s NFP numbers should soften the blow from any disappointing numbers, however.

Attention will then shift to January inflation figures due out on Thursday. FED Chair Powell had raised concerns over inflation at the last FOMC press conference. Expect any softer inflation figures to weigh on the Dollar.

At the end of the week, January retail sales, industrial production figures and prelim February consumer sentiment figures will also provide direction.

Retail sales figures will be the key driver. With labor market conditions supporting, recent consumer sentiment figures point to positive consumption.

Outside of the numbers, FED Chair Powell is scheduled to testify before Congress on Tuesday and Wednesday.

With economic data impressing last week, the Dollar may well find more support in the week ahead. Powell may want to avoid spooking the markets, however…

There’s the continued threat of the coronavirus to temper down any particularly hawkish chatter.

The Dollar Spot Index ended the week up by 1.33% to 98.684.

For the EUR:

It’s a relatively busy week ahead on the economic data front.

The markets will need to wait until Wednesday for December industrial production numbers for the Eurozone.

Following figures out of member states last week, the numbers would need to come in well ahead for a forecasted 1.5% slide to provide support. The damage was largely done with last week’s figures out of France and Germany disappointing.

The market focus will then shift to 1st estimate GDP numbers out of Germany and 2nd estimate GDP numbers for the Eurozone.

Expect Germany GDP numbers to have a greater impact on the day.

Finalized inflation figures out of German, France, and Spain and Eurozone trade data will likely have a muted impact on the EUR.

On the monetary policy front, ECB President Lagarde is due to speak on Friday. Following some quite dire numbers out of Germany and France last week, there’s unlikely to be too much hawkish chatter…

The EUR/USD ended the week up down by 1.33% to $1.10946.

For the Pound:

It’s a busier week ahead on the economic calendar.

Key stats include 4th quarter GDP numbers and industrial and manufacturing production figures for December.

Expect the Pound to be particularly sensitive to the numbers due out on Tuesday.

December trade figures and January retail sales figures will likely have a muted impact on the day.

The Pound will also brush aside house price figures due out on Friday.

Outside of the numbers, however, Brexit will continue to be a pressure point for the Pound that is unlikely to ease anytime soon.

Few are expecting the EU to buckle to Boris Johnson’s demands without some pressure from his pal Trump…

The GBP/USD ended the week down by 2.38% to $1.2892.

Please note that the Budget is not due until March, this was highlighted in error in the interview.

For the Loonie:

It’s a quiet week ahead on the economic calendar.

Key stats are limited to January housing starts and December building permit figures.

With stats on the lighter side, we can expect the Loonie to respond to the numbers. Any major moves will likely be limited, however.

The markets will be looking for economic indicators that could force the BoC into a move in the coming months.

Expect market risk sentiment and influence on crude oil prices to influence in the week. OPEC and the IEA’s monthly reports this week will certainly be of interest. The markets will be in search of a cut in output to offset any negative projections on consumption…

On the monetary policy front, BoC Gov. Poloz is scheduled to speak on Thursday. We can expect the Loonie to remain sensitive to any chatter on monetary policy.

The Loonie ended the week down by 0.54% to C$1.3308 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s also a relatively quiet week ahead.

Key stats include business confidence figures due out on Tuesday and consumer confidence figures due out on Wednesday.

Following the RBA’s rate statement last week, weak confidence numbers will weigh heavily on the Aussie Dollar.

There’s plenty of uncertainty over what impact the bushfires and the coronavirus spread has had on the Australian economy. The RBA statement of monetary policy and testimony from RBA Gov. Lowe suggested that the impact of both are projected to be short-term headwinds.

There may be an issue with the coronavirus forecast… There was some relief last week on bushfire front, however, with rains dowsing some of the fires late in the week.

The Aussie Dollar ended the week down by 0.28% to $0.6673.

For the Kiwi Dollar:

It’s a relatively quiet week ahead on the economic data front. Key stats include January credit card retail sales figures due out on Wednesday and January’s Business PMI on Friday.

While the numbers will provide direction, the RBNZ monetary policy decision on Wednesday is the main event.

The markets had priced in a hold on rates for the year. The spread of the coronavirus and impact on China’s economy and demand for goods and raw materials may lead to a more dovish outlook.

We’ve seen the RBNZ catch the markets by surprise before, so there is a downside risk for the Kiwi Dollar mid-week.

Exports to China accounted for 28% of New Zealand’s total exports in December. Prolonged disruption is likely to raise concerns amongst members of the RBNZ.

Expect the Rate Statement and Press Conference to have the greatest influence on the day.

RBNZ Gov. Orr has a 2nd stab at it on Thursday, with any chatter on policy likely to garner further attention.

The Kiwi Dollar ended the week down by 0.99% to $0.6400.

For the Japanese Yen:

It’s a particularly quiet week on the economic calendar. Key stats are limited to December’s current account and tertiary industry activity figures that will have a muted impact on the Yen.

Market risk appetite will continue to be the key driver for the Yen in the week. It’s been Jekyll and Hyde for the markets over the coronavirus. Jekyll could well become more prominent as the death toll continues to rise…

The Japanese Yen ended the week down by 1.29% to ¥109.75 against the U.S Dollar.

Out of China

It’s also a relatively quiet week on the economic data front. January inflation figures are due out on Monday.

With stats on the lighter side, expect updates on the coronavirus and any announcements from Beijing to be key drivers in the week.

The lack of stats and market focus on the coronavirus will increase market sensitivity to Chinese loan figures due out on Friday, however.

The Chinese Yuan fell by 1.32% to CNY7.0024 against the U.S Dollar in the week.

Geo-Politics

Trade Wars: While China is in lockdown, China announcing tariff reductions due to kick in on Friday was positive last week. How the U.S responds, as China struggles with the spread of the coronavirus will be key in the week ahead.

China is unlikely to be able to ramp up agri goods imports, or there could be increased demand to offset a slide in domestic output. The numbers will be of interest in the weeks ahead…

Looking beyond China, a decision on a U.S auto deal with the EU was put on ice going into the weekend….

UK Politics: It’s all about trade now and any aggressive chatter from EU member states will just add more pressure on the Pound. British PM Johnson would need to take a softer stance on strings attached for the Pound to pick itself up from the floor.

Iran and the Middle East: It’s been relatively quiet in the Middle East. Will Trump look to build pressure on Iran to return to the negotiating table? A move must be imminent…

Corporate Earnings

It’s another busy week ahead on the corporate earnings calendar.

While there are no marquee names from the U.S, there are some notable earnings releases from Europe and the UK…

Out of Germany: Daimler (Tue) and Commerzbank (Thurs) are big releases in the week ahead.

From the UK: Tullow Oil Plc (Thurs), Manchester United (Fri), and Royal Bank of Scotland Group PLC (Fri) also scheduled to release earnings results.

This article was originally posted on FX Empire

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