Last week, the Bank of Japan, Bank of Canada and European Central Bank all left interest rates unaltered.
By Ben Robson
Australia posted improved employment statistics. Inflation crept up in Japan and New Zealand and remained steady in Canada. The UK’s manufacturing and services PMIs (purchasing managers indexes) beat forecasts. US Treasury Secretary Steven Mnuchin was also upbeat on an improved trade scenario between the UK and US post Brexit.
This week, the main focus is on the US and UK, not least because both countries announce interest rate decisions, but also because of ongoing US impeachment proceedings against US President Trump and because Brexit will be done!
On the economic front, we will receive a gauge of US consumer confidence, important US GDP numbers and reading for US Core Personal Consumption expenditure (inflation). The Eurozone and Canada will also release GDP statistics and Australia and the Eurozone print their inflation numbers.
The markets are always fascinating, and I had an interesting discussion with a friend last week who is a pure technical analyst. My mindset is that macro-events drive markets. There’s great evidence to support this with the numerous market moves we have witnessed following trade discussions or surprise data announcements for example; moves that really cannot be explained by technical analysis. My friend is content to ignore data and choose trades by studying chart dynamics. Each to their own. But for me, this is a big macro week and I can’t help feeling excited for the UK.
Tuesday’s biggest data event is US consumer confidence which is expected to have risen to 128 for January vs 126.5 for December. Positives for consumer confidence are buoyant stock markets. FAANG stocks are always big in the news with Facebook, Apple and Amazon reporting earnings this week. Although these earnings won’t affect this month’s consumer confidence number their performance may well affect next month’s print. It’s difficult to gauge the importance of impeachment proceedings on consumer confidence, save to say that the Trump factor is a driver for stock markets too.
Wednesday morning and Australian 4th quarter inflation figures are released with CPI expected to remain steady at 1.7% Y/Y. The FOMC will announce US interest rates later in the day, which are expected to remain on hold in the boundaries of 1.5% -1.75%. Fed Chair Jerome Powell will speak post the announcement.
On Thursday it is the turn of the monetary policy committee of the Bank of England to deliver an interest rate decision, with UK rates expected to remain on hold at 0.75%. Some analysts expect a cut. If that’s the case, it’s one and done. Last week’s PMI figures will probably push the committee to stay pat. B. of E. Governor Carney will deliver his final post-decision speech as he will soon relinquish his post. US 4th quarter GDP in the afternoon is expected to post a small upward surprise at 2.2%.
Friday’s Eurozone CPI is expected to rise to 1.4% Y/Y for January. Eurozone 4th GDP is expected to fall to 1.1% Y/Y. Canadian Y/Y GDP for November should be in the 1.1-1.2% range. US core PCE for December is expected to remain at 1.6% Y/Y. The 31st of January is also Brexit day. If the UK keeps interest rates on hold on Thursday, then Brexit celebrations and hope may see the British pound start to rally.
Good Luck and Good Trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You Can Too.
