On Monday most banks and financial institutions will be closed in the US due to Martin Luther King’s day so liquidity in the markets will be thinner than usual, causing higher spreads and more volatile movements.
USD
FED’s George, who is the most hawkish member of the FED, also acknowledged that FED can be patient and wait with rate hikes.
He added that a pause in the normalisation process would provide time to exercise the economy. This supports the general view they may pause until June. FED’s Williams stated the need for “prudence, patience and good judgement”. He added that FED doesn’t see worrying signs of inflation pressures and that FED will reassess the balance sheet policy if conditions change. US GDP growth will be about 2.0-2.5% in 2019 vs 3% in 2018.
This week we expect to get data on housing, preliminary PMIs and Durable Goods, however due to the ongoing government shutdown some data may be delayed. The shutdown has already cost $3.5 bn according to S&P Global ratings. This is the longest government shutdown in US history, lasting almost a month now.
Important news for USD:
Tuesday:
Existing Home Sales
Thursday:
Markit Manufacturing PMI
Markit Services PMI
Markit Composite PMI
Friday:
Durable Goods
New Home Sales
EUR
Industrial production for the month of November for entire Eurozone came in at -1.7% m/m vs -1.5% m/m as expected. Worse than expected reading reflecting previously published German and French industrial production data signalling further slowdown of economic activity in the Q4. The first release of German GDP data came in at 1.5% y/y as expected for the 2018. Both exports and imports came in lower in 2018 than in 2017 reflecting a slowdown for German products, resulting from slowing economic growth and lower domestic demand.
Eurozone trade balance for the month of November showed a surplus of €15.1 bn vs €12.6bn as expected. However slight inspection under the hood of these numbers shows that higher surplus was achieved by both falling exports and falling imports. Exports fell 1% m/m and imports fell 1.9% m/m. As for trade with the US, the year-to-date November 2018 trade surplus stands at €129.0 bn and that is far greater than the year-to-date November 2017 trade surplus of €107.4 bn. Final CPI reading was in line with the expectations with headline CPI showing 1.6% y/y and core CPI showing 1% y/y.
ECB president Draghi came in as dovish with his remarks that further substantial stimulus is needed. This warning comes as a response to the slew of weak data from EU that were acknowledged by Draghi as weaker than expected. He added that there is no room for complacency which could lead to a dovish statement at next week’s ECB meeting.
This week centre stage will be taken by ECB interest rate decision and monetary policy conference headed by the president Draghi. Changes in the rate are not expected, however due to weaker economic data coming from the EU it is possible that Draghi will be more dovish in his statement shifting the assessment of risks from “broadly balanced” to “tilted to the downside”. Additionally, we will have data on business conditions in EU and Germany as well as preliminary PMIs.
Important news for EUR:
Tuesday:
ZEW Economic Sentiment Indicator (EU and Germany)
Thursday:
Markit Manufacturing PMI (France, Germany and EU)
Markit Services PMI (France, Germany and EU)
Markit Composite PMI (France, Germany and EU)
ECB Interest Rate Decision
ECB Monetary Policy Press Conference
Friday:
Ifo Business Expectations (Germany)
Ifo Business Climate (Germany)
GBP
The Brexit deal was voted down with 230 votes difference (202-432). This is the biggest loss for UK Government in history. Leader of the Labour Party Jeremy Corbyn immediately seized the opportunity and called for a no-confidence vote. PM May survived the no-confidence vote with a narrow margin of 19 votes (325-306). The vote can be repeated in the near future, and if PM May does anything that DUP party doesn’t like they will likely abandon support for her. PM May stated that she will get together with all parties to prepare a way forward. A motion on government’s next steps regarding Brexit will be brought before Parliament on January 21 and debate on the motion will be held on January 29.
December CPI came in at 0.2% m/m as expected and 2.1% y/y as expected with the prior reading showing 2.3%. Fall in the headline inflation is contributed to falling fuel, lubricant and petrol prices. Core CPI came in at 1.9% y/y vs 1.8% y/y as expected. Rise in core inflation shows that real inflationary pressures are holding steady. Retail sales came in at -0.9% m/m vs -0.8% m/m as expected. Retail Sales are 3% y/y. Consumers shaken by the Brexit uncertainties and the fact that most of the Christmas shopping was done on Black Friday in November caused a very weak reading showing the worst December performance in a decade.
This week we will have a Plan B regarding the Brexit from PM May. There are several possibilities: a second referendum, a Norway-style partnership, or a permanent customs union. From a strictly economic prospective we will have data on wages and employment.
Important news for GBP:
Monday:
Plan B regarding the Brexit
Tuesday:
Average Weekly Earnings
Unemployment Rate
AUD
Chinese trade balance for the month of December came in at CNY 395bn vs CNY 345bn as expected. Exports came in at 0.2% y/y vs 6.6% y/y as expected with the prior reading showing 10.2% y/y. Imports came in at -3.1% y/y vs 12.0% y/y as expected with the prior reading showing 7.8% y/y. In USD terms exports fell 4.4% y/y while imports plunged 7.6% y/y. Both export figures and import figures were huge misses showing that the trade war is taking its toll, along with global slowdown (exports) and demand in China is slowing (imports). The Chinese government announced a new stimulus, tax cuts and lowering of the RRR rate, so the country can continue with high paced economic growth.
This week we will have GDP, consumption and industrial production data from China and employment data from Australia.
Important news from AUD:
Monday:
GDP (China)
Retail Sales (China)
Industrial Production (China)
Thursday:
Employment Change
Unemployment Rate
Participation Rate
NZD
Food prices for the month of December came in at -0.2% m/m vs -0.6% m/m the previous month. Lesser fall of prices than in the previous month can be positive for inflation and NZD in general. GDT Price Index came in at 4.2% for a fourth consecutive positive auction. NZD was unchanged on this news possibly because of the overwhelming market themes (Brexit). Electronic card spending for the month of December came in at -2.3% m/m vs -0.4% m/m as expected for a huge miss. This data accounts for about 70% of NZD retail sales data so we can expect a weak number coming in next week. House sales dropped 12.9% y/y. Business NZ manufacturing PMI for the month of December came in at 55.1 vs 53.5 the previous month.
This week we will have inflation data from New Zealand.
Important news for NZD:
Tuesday:
CPI
CAD
CPI for the month of December came in at 2% y/y vs 1.7% y/y as expected. Positive beating immediately reflected in CAD strength across the markets.” A month-over-month increase in the air transportation index (+21.7%) reflected higher prices for travel during the holiday season,” Statistics Canada reported. Core common and Core trimmed numbers came in at 1.9% y/y, the same as the prior reading while Core median ticked down to 1.8% y/y from 1.9% y/y the previous month. BOC just got new ammunition to continue with its hawkish rhetoric.
This week we will have data on wholesale trade as well as manufacturing and retail sales.
Important news for CAD:
Tuesday:
Manufacturing Sales
Wholesale Trade
Wednesday:
Retail Sales
JPY
Deputy governor Amamiya said in his speech at G20 symposium that ageing population of Japan can negatively affect future economic activity and that it is an important risk factor for the economy. He stated that “given the appropriate policy response, it can also have a positive impact on the economy” and added that ageing is a common policy challenge for all G20 members. National CPI for the month of December came in at 0.3% y/y as expected. CPI excluding fresh food and energy also came in at 0.3% y/y as expected. Far cry from the targeted 2%. Governor Kuroda stated that he expects US-China trade war to be resolved this year.
This week we will have the BOJ interest rate decision, followed by the outlook report, monetary policy statement and press conference will take the centre stage. Changes in the rate are not expected, however revision down of inflation forecasts in outlook report is possible, especially after national CPI data, which means that loose policy will remain for a longer period of time and that is negative for JPY. Additionally, we will see data on trade balance as well as preliminary manufacturing PMI and inflation data for the Tokyo area.
Important news for JPY:
Wednesday:
Trade Balance
Exports
Imports
BOJ Interest Rate Decision
BOJ Outlook Report
BOJ Monetary Policy Statement
BOJ Press Conference
Thursday:
Nikkei Manufacturing PMI
Friday:
Tokyo CPI
CHF
SNB governor Jordan acknowledged that economic uncertainties have increased in recent months. He stated that negative interest rates make life difficult for pension funds and affect the property markets but increasing rates would negatively affect the economy and that would also have a negative impact on pensions. According to him there is no risk of Swiss inflation rising in the near future.
You can follow all economic events on the Economic Calendar page on our Website. MT4 server time is set to GMT + 2 and if you need assistance converting MT4 server time to your local time you can use some of the online time converters such as WorldTimeBuddy.
Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets.Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.
