Weaker than expected data was reported almost
everywhere. After suffering losses, can the US dollar emerge as a winner?
Euro-zone inflation, Us consumer confidence, Housing data, Unemployment Claims
and GDP data from the US, UK and Canada are among the major events on our calendar.
Here is an outlook on the main market-movers this week.
The weakness was seen everywhere: a terrible Philly Fed Index in
the US, a disappointing growth rate in Japan, a weak PMI in China, lower
business sentiment in Germany and a rising unemployment rate in the UK, among
others. Nevertheless, it seems that one central bank is not deterred: the
Federal Reserve. Meeting minutes from the last decision showed again that the
taper train is on the track. So, after a streak of losses, can the US dollar
make a comeback? Let’s start:
1.
German
Ifo Business Climate: Monday, 9:00. German
business confidence soared to 110.6 in January from 109.5 in December, rising
to the highest level since July 2011. The reading surpassed forecasts of 110.2,
indicating German economy is expanding full steam. The Bundesbank has projected
a strong expansion in 2014, after the weak final quarter of 2013 where German
economy shifted from domestic demand to global trade. Another climb to 110.7 is
expected this time.
2.
US
CB Consumer Confidence:
Tuesday, 15:00. Consumers sentiment unexpectedly edged up in January to 80.7
from 77.5 in December, reaching a five-month high amid renewed optimism about
the economy and labor market. Economists expected a weaker reading of 78.3. US
jobs market improved offering plentiful positions and higher wages propelling
consumer purchases and confidence. A small decline to 80.2 is forecasted.
3.
UK
Second Estimate GDP: Wednesday, 9:30. The
first release of UK GDP showed a growth rate of 0.7% in Q4 2013, which is quite
solid growth. A confirmation of this figure is expected in the second release.
According to NIESR monthly estimates, GDP has increased by 0.8% in the three
months ending in January 2014. The Bank of England is expected to keep interest
rates on hold until the second quarter of 2015 and annual GDP growth will reach
2.5% in 2014 and 2.1% in 2015.
4.
US
New Home Sales: Wednesday, 15:00.
The annual number of new home sales disappointed for the second consecutive
month with a seasonally adjusted annual rate of 414,000 units, much weaker than
the 445,000-unit pace registered in November missing predictions for a rise to
457,000. Many blamed the harsh winter conditions for the ongoing fall in the
housing sector with a 36.4% fall in the Northeast which was hit by cold
temperatures. This fall is not consistent with the strong demand reflected in
the declining inventory for new and existing homes, indicating this is only a
temporary setback. Another drop to 406,000 is expected now.
5.
US
Durable Goods Orders: Thursday, 13:30.
Orders for long-lasting U.S. manufactured goods excluding transportation
items plunged unexpectedly in December by 1.6% after a 1.2% gain in the
previous month posting the biggest decline since March 2013. Most orders were
weak, with the exception for machinery, and electrical equipment, appliances
and components rising. Durable goods orders fell 4.3% in December after a 3.4%
climb in November, pulled down by weak demand for transportation equipment,
primary metals, computers and electronic products and capital goods.
Durable Goods Orders are expected to decline 0.7% while core Durable
Goods Orders are expected to fall 0.1%.
6.
US
Unemployment Claims: Thursday, 13:30. The
number Americans filing applications for unemployment benefits dropped by 3,000
last week, to a seasonally adjusted 336,000, indicating firing has not
increased. The number of applicants became stable in recent weeks despite
modest levels of hiring in January and February, signaling business confidence
is improving. In recent months, frigid weather slowed down hiring, retail sales
and home construction. Job growth for the past two months reached only a half
the monthly average for the previous two years. However lower unemployment rate
of 6.6% was an improvement from December. Another drop to 333,000 is
anticipated now.
7.
Euro-zone
Flash CPI: Friday, 10:00. As
the focus of the ECB shifted to inflation (or the lack of it), the importance
of CPI has risen. The surprising drop in inflation in October triggered a rate
cut in November. Year over year CPI is expected to remain unchanged at 0.7%.
However, a strong euro and a fragile recovery could result in a new low for CPI
and perhaps for core CPI, which also bottomed out at 0.7% so far. A drop to new
cycle lows could trigger a negative deposit rate from the ECB in March.
8.
Canadian
GDP: Friday, 13:30. The
Canadian economy expanded by 0.2% in November, in line with market forecast,
rising for the fifth straight month amid a recovery in the oil industry
outpaced a decline in manufacturing. This increase was preceded by a 0.3%
increase in both September and October. Oil and gas extraction rose 2.6%, after
a 0.7% decline in October, and mining and quarrying increased by 1.3%. Overall
manufacturing output climbed 0.4% while the service sector increased by 0.2%.
Canadian economy is expected to contract 0.2% this time.
9.
US
GDP: Friday, 13:30.
According to the first release, the US economy grew by 3.2% in Q4 2013. Already
at that release, there were worries about the quality of this growth, with an
inventory buildup taking a large part in that growth. After a few weak figures,
expectations are for a downgrade of growth to 2.6% at the second and not final
release.
10.
US
Pending Home Sales: Friday, 15:00. The
number of contracts to purchase previously owned homes in the U.S. plunged in
December by 8.7% following a 0.3% decline in the preceding month. This was the
worst reading since May 2010 amid higher borrowing costs and bad weather
conditions halting sales. Analysts expected a modest drop of 0.3%, but
unusually cold weather discouraged potential buyers. A rise of 2.9% is
forecasted.
11.
Mark
Carney speaks: Friday, 15:30. BOE Governor
Mark Carney will speak in Frankfurt on Central Bankers. Earlier this month
Carney said there is a need to change the compensation structures so that banks
could see whether employees had taken undue risks or behaved badly and that
compensation of bankers should be withheld and deferred for a very long time.
These comments were made after news that Barclays was paying bigger bonuses
despite announcing plans to cut staff in response to a fall in profits. Carney
may also refer to the developments in the housing market and the means to
prevent a bubble from developing. Any comment on the interest rate will be
closely scrutinized after Carney hinted a hike in Q2 2015.
That’s it for the major events this week. Stay tuned for
coverage on specific currencies
*All times are GMT.
0 comments:
Post a Comment