FXEMPIRE
All

The Week Ahead: Monetary Policy in Focus, with the PBoC, BoJ, BoC, and the ECB in Action

It’s a big week on the monetary policy front, with stats also to influence…
Bob Mason
Light Board

On the Macro

It’s a busy week ahead on the economic calendar, with 47 stats to monitor. In the previous week, 63 stats had been in focus.

For the Dollar:

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

With the U.S markets closed on Monday, the markets will need to wait until Wednesday for the first set of numbers.

December’s existing-home sales figures are due out on Wednesday, which will likely have a muted impact on the Dollar.

Existing home sales figures tend to be volatile due to inventories. There has been a pickup in real estate sector activity, supported by mortgage rates and labor market conditions. We can, therefore, expect the markets to be able to stomach any minor falls in the month.

On Thursday, the weekly jobless claims figures are due out, which will also have a muted impact on the Dollar, barring any jump above 220k.

Prelim private sector PMI numbers for January due out on Friday wraps things up. The service sector PMI will have the greatest impact on the day.

Outside of the numbers, geopolitics will remain in focus. With the impeachment trial expected to get underway, expect Trump to attempt to distract…

The Dollar Spot Index ended the week up by 0.26% to 97.606.

For the EUR:

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

Key stats include January’s ZEW Economic sentiment figures for Germany and the Eurozone, due out on Tuesday.

The focus will then shift to prelim January private sector PMI numbers due out on Friday.

While December PMI numbers showed some improvement, the figures were still unimpressive.

Friday’s numbers will need to show a slower contraction in the manufacturing sector and pickup in service sector activity.

The China Automobile Association Manufacturers’ outlook for the auto sector was not what the doctor orders last week. A further slowdown in demand for autos in China would add pressure on the manufacturing sector, and Germany’s in particular.

On Friday, Germany’s IFO Business Climate Index figures will also influence on the day.

On the monetary policy front, the ECB’s first monetary policy decision of the year is due on Thursday.

While the ECB is unlikely to make a move, the Lagarde press conference will garner plenty of attention…

In the week, ECB President Lagarde is also scheduled to speak late on Monday and on Friday afternoon.

Outside of the numbers, geopolitical risk will continue to influence as the markets look towards chatter on Brexit and news from the impeachment trial.

The EUR/USD ended the week down by 0.26% to $1.1092.

For the Pound:

It’s another relatively busy week ahead on the economic calendar. Employment figures are due out on Tuesday. Expect the wage growth and claimant count numbers to have the greatest impact.

With sentiment towards BoE monetary policy turning more dovish, another jump in claimant counts would turn the screw.

On Wednesday, the CBI Industrial Trend Order numbers for January will also influence. Expect weaker numbers to pressure the Pound further.

The focus will then shift to the all-important January prelim private sector PMI numbers due out on Friday. We would expect the service sector numbers to have the greatest impact. Forecasts are GBP negative…

Outside of the numbers, Brexit will continue to be the main area of focus. 11-days remain until Britain enters the transition period.

The GBP/USD ended the week down by 0.37% to $1.3016.

For the Loonie:

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

At the start of the week, manufacturing sales figures for November are due out. Another fall will pressure the Loonie early.

The focus will then shift to December inflation figures due out on Tuesday, which are due out ahead of the BoC’s first monetary policy decision of the year.

There have been plenty of disappointing numbers that would support a more dovish BoC statement.  With the BoC expected to stand pat on policy, the press conference will likely have the greatest impact.

It remains to be seen whether better employment figures for December and the USMCA will give the BoC reason to maintain the status quo…

November retail sales figures due out on Friday wrap things up, with the numbers forecasted to be Loonie positive.

The Loonie ended the week down by 0.12% to C$1.3066 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week ahead.

Key stats include consumer confidence figures due out on Wednesday and December employment numbers due out on Thursday.

While we expect both sets of numbers to influence, the employment figures will have the greatest impact.

The fires continue to burn in Australia and are expected to have a material impact on consumption and output.

Weak employment numbers will add further support to an RBA rate cut next month.

The Aussie Dollar ended the week down by 0.32% to $0.6879.

For the Kiwi Dollar:

It’s a quiet week ahead, with key stats limited to the 4th quarter inflation figures due out on Friday.

The markets are expecting the RBNZ to stand pat at the start of the year. Any dire numbers could question the outlook…

The Kiwi Dollar ended the week down by 0.24% to $0.6615.

For the Japanese Yen:

It’s a relatively busy week on the economic calendar. Key stats include December trade data due out on Thursday and inflation and private sector PMI figures due out on Friday.

Expect the trade and PMI figures to have the greatest influence in the week. While the phase 1 agreement is expected to ease pressure on trade terms, demand may be another issue altogether…

After all, it’s going to take some time for the effects of the phase 1 agreement to trickle through.

On the monetary policy front, the Bank of Japan will deliver its first policy decision of the year. Last week BoJ Governor Kuroda had assured the markets that the BoJ would act if required. Will the BoJ stand pat but raise the prospects of a move?

The Japanese Yen ended the week down by 0.63% to ¥110.14 against the U.S Dollar.

Out of China

It’s a quiet week on the economic data front. There are no material stats due out ahead of the Chinese NY Holidays.

With the phase 1 agreement signed, sealed and delivered, it now comes down to compliance and near-term impact on the economic indicators.

Tariffs remain and a full trade agreement is going to be needed to support extended growth.

On the policy front, the PBoC will deliver its loan prime rate decisions for January on Monday. Expect any easing to support riskier assets.

The Yuan ended the week up by 0.86% to CNY6.8598 against the Greenback.

Geo-Politics

Impeachment: Trump’s impeachment trial will be in full swing in the week. We can expect plenty of chatter, though the chances of being ousted from office remain slim to none.

Trade Wars: With the phase 1 trade agreement signed, the markets will be looking for some guidance on when phase 2 talks will commence. Will Trump look to distract the markets from the impeachment trial and find a new target?

UK Politics: It’s the week before Brexit. With Britain leaving the EU on 31st, it enters into an 11-month transition period and plenty of uncertainty. There are two ways to spin it, however. Swift progress in forming trade agreements with partners beyond EU borders should ease pressure on the Pound.

Iran and the Middle East: After the escalation and de-escalation, it was relatively quiet last week. It is not expected to remain so, however. Expect any chatter from Washington and Tehran to have a material impact on risk appetite.

Corporate Earnings

It’s a relatively busy week ahead on the corporate earnings calendar. From the U.S: Amex (Mon). Netflix (Tue). Lockheed Martin (Thurs), and Microsoft (Thurs) are amongst the big names scheduled to release in the week ahead.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US