Review of the main events of the Forex economic calendar for the next trading week (16.01.2023 – 22.01.2023)
Despite Friday’s correction, the dollar ended the week in negative territory, with its DXY index losing more than 1.5% and ending up even closer to the psychologically significant 100.00 mark.
There is growing confidence among market participants that the Fed will continue to slow down the pace of tightening its policy, eventually completely stopping this process, and perhaps in the future moving on to its easing again.
The reason to think so is the latest macro data from the US. A week earlier, it was disappointing data on business activity in the services sector of the US economy, and last week, investors were again forced to think about the information on inflation in the US showing signs of a slowdown.
Thus, according to data by the US Bureau of Labor Statistics published last Thursday, in December, the annual Consumer Price Index fell again to 6.5% from 7.1% a month earlier, and Core CPI – to 5.7%, from 6% in November.
Raising the interest rate in the face of a slowdown in the economy and inflation is unacceptable.
Now market participants will wait for new information about the state of the US economy on the eve of the Fed meeting, which will begin on the last day of this month.
Next week, they will pay attention to the publication of important macro statistics from China, the UK, Germany, Canada, Australia, as well as the results of the meetings of the central banks of Japan and China dedicated to monetary policy issues. In the US, next week will begin with a national holiday (Martin L. King Day). Banks and stock exchanges in the country will be closed. No important macro statistics on Monday is scheduled to be released. Among the notable events of next week, it is also worth highlighting the World Economic Forum (WEF) in Davos (Switzerland), which will be held under the motto “Cooperation in a Fractured World”. Unexpected announcements made during this forum may also affect the dynamics of financial markets, causing an increase in volatility in individual instruments.
* during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.
** GMT time
Monday, January 16
No important macro statistics on Monday is scheduled to be released, and the US celebrates the birthday of Martin L. King: trading volumes will be low, especially during the US trading session. This day also marks the beginning of the 5-day World Economic Forum (WEF) in Davos (Switzerland). Under the motto “Cooperation in a Fractured World”, representatives of 130 countries will discuss global problems related to climate change, wars, international conflicts, and the coronavirus pandemic. Most likely, problems in the global economy related to high inflation and recession risks will also be touched upon.
Tuesday, January 17
02:00 CNY China GDP for the 4th quarter. Retail sales index
The National Bureau of Statistics of China will present data on GDP growth in the 4th quarter of 2022.
Chinese GDP is expected to grow again in Q4 2022 after -2.6% (+0.4% YoY) in Q2, +1.3% (+4.8% YoY ) in Q1 2022, +1.6% (+4.0% YoY) in Q4, +0.2% (+4.9% YoY) in Q3 quarter, +1.3% (+7.9% YoY) in Q2 and +0.6% (+18.3% YoY) in Q1 2021.
China is the largest buyer of raw materials and a supplier of a wide range of finished products to the world commodity market. China’s economy is already the largest in the world, according to many sources, pushing the US economy to second place. Therefore, the publication of important macroeconomic indicators from China can have a strong impact on the entire financial market.
The relative decline in GDP may have a negative impact on the yuan quotes, as well as on the quotes of commodity currencies and currencies of the Asia-Pacific region, since it may indicate a slowdown in the growth of the Chinese economy.
The growth of the indicator will have a positive impact on the Chinese yuan, as well as on the world stock indices, primarily Asian, as well as on quotations of commodity currencies such as the New Zealand and Australian dollars. China is the largest trade and economic partner of Australia and New Zealand and the buyer of raw materials from these countries.
Therefore, positive macro statistics from China may also have a positive impact on the quotes of these commodity currencies, although the expected data indicate a slowdown in the world’s largest economy, and this is a negative factor for stock markets and quotes of commodity currencies.
The Retail Sales Index is released monthly by China’s National Bureau of Statistics and evaluates the total volume of retail sales and cash generated. The index is often considered an indicator of consumer confidence and economic well-being and reflects the state of the retail sector in the near term. The growth of the index is usually a positive factor for the CNY; a decrease in the indicator will negatively affect the CNY. The previous value of the index was (in annual terms) -5.9% (after an increase of +8% in the last months of 2019 and a fall of -20.5% in February 2020).
The data suggests an uneven pace of recovery after a strong drop in February-March 2020. If the data turns out to be weaker than the forecast or previous values, the CNY may weaken sharply.
07:00 GBP Report on the average wages of the British for the last 3 months. Unemployment rate
Every month, the National Office for Statistics (ONS) publishes a report on average wages for the last 3 months, with and without bonuses.
This report is a key short-term indicator of the dynamics of changes in wages of employees in the UK. Wages growth is a positive factor for the GBP, while the low value of the indicator is negative. Forecast: The January report suggests that the average wages with bonuses rose again over the last 3 months (September-November) after an increase of +6.0%, +6.0%, +5.5%, +5.2%, +6.4%, +6.8%, +7.0%, +5.6%, +4.8%, +4.3%, +4.2%, +4.9%, +5.8%, +7.2%, +8.3%, +8.8%, +7.3%, +5.6%, +4.0% in previous periods); wages without bonuses also increased after the growth of +5.7%, +5.4%, +5.2%, +4.7%, +4.4%, +4.2%, +4.2%, + 4.1%, +3.8%, +3.7%, +3.8%, +4.3%, +4.9%, +6.0%, +6.8%, +7, 4%, +6.6%, +5.6%, +4.6% in previous periods). Thus, the data points to the continued growth of wages, which is a positive factor for the pound. If the data turns out to be better than the forecast and / or previous values, the pound is likely to strengthen in the foreign exchange market. Data worse than forecast/previous values will have a negative impact on the pound.
Also at this time the office publishes data on unemployment in the UK. It is expected that for 3 months (September-November) unemployment was at the level of 3.6% (against 3.7%, 3.6%, 3.5%, 3.6%, 3.8%, 3.8% , 3.8%, 3.7%, 3.8%, 3.9%, 4.1%, 4.2%, 4.3%, 4.5%, 4.6%, 4.7% , 4.8%, 4.7%, 4.8%, 4.9%, 5.0%, 5.1%, 5.0% in previous periods).
Since 2012, the UK unemployment rate has steadily declined (from 8.0% in September 2012). This is a positive factor for the pound, while a rise in unemployment is a negative factor.
If the data from the UK labor market turns out to be worse than the forecast and / or the previous value, the pound will be under pressure.
In any case, the publication of data from the British labor market is expected to increase volatility in the quotes of the pound and the London Stock Exchange.
07:00 EUR Harmonized Index of Consumer Prices (HICP) in Germany (final release)
This index is published by the EU Statistics Office and is calculated on the basis of a statistical method agreed between all EU countries. It is an indicator for assessing inflation and is used by the Governing Council of the ECB to assess the level of price stability. A positive result strengthens the EUR, while a negative result weakens it.
Previous indicator values: 0% in November, +11.6% in October, +10.9% in September, +8.8% in August, +8.5% in July, +8.2% in June, + 8.7% in May, +7.8% in April, +7.6% in March, +5.5% in February, +5.1% in January 2022 (annualized). If the December data turn out to be better than the previous values, the euro may strengthen in the short term. The growth of the indicator is a positive factor for the euro. The data suggests that inflationary pressures in Germany are easing, which in turn reduces the pressure on the ECB to tighten its monetary policy. Data worse than the previous value will have a negative impact on the euro. Forecast: -1.2% in December (preliminary estimate was -1.2% with the forecast of +11.8%).
13:30 CAD Core Consumer Price Index in Canada
Core Consumer Price Index (Core CPI) from the Bank of Canada reflects the dynamics of retail prices of the corresponding basket of goods and services (excluding fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products). The inflation target for the Bank of Canada is in the range of 1%-3%. Growing CPI is a harbinger of a rate hike and positive for the CAD. Core Consumer Price Index rose in November by 0% (+5.8% in annual terms), in October +0.4% (+5.8% in annual terms), in September by +0.4% (+6. 0% in annual terms), in August by 0% (+5.8% in annual terms), in July 2022 by +0.5% (+6.1% in annual terms), in June 2022 by +0.3 % (+6.2% in annual terms), by +0.8% (+6.1% in annual terms) in May, by +0.7% (+5.7% in annual terms) in April, in March 2022 by +1.0% (+5.5% in annual terms), in February by +0.8% (+4.8% in annual terms), in January by +0.8% (+ 4.3% in annual terms). If the expected data turns out to be worse than the previous values, this will negatively affect the CAD. Data better than previous values will strengthen the Canadian dollar.
Wednesday, January 18
03:00 JPY Bank of Japan interest rate decision. Bank of Japan press conference and monetary policy statement
The Bank of Japan will decide on the interest rate. At the moment, the main rate in Japan is in negative territory, amounting to -0.1%. Most likely, the rate will remain at the same level. If it is cut and deepens into negative territory, such a decision will cause a sharp decline in the yen in the foreign exchange market and an increase in the Japanese stock market. In any case, a jump in volatility in the quotations of the yen and in the Asian financial market is expected during this period of time.
Since February 2016, the Bank of Japan has kept the deposit rate at -0.1%. The yield target for 10-year bonds is currently in the 0% region. One of the recent accompanying statements from the Bank of Japan said that the management of the bank will continue to “increase the monetary base until inflation is stable above 2%.” “We will not hesitate to take additional easing measures if necessary,” the bank also traditionally said in a statement.
During the press conference, the head of the Bank of Japan Haruhiko Kuroda will comment on the bank’s monetary policy. The Bank of Japan continues to adhere to its ultra-soft monetary policy. As Kuroda has repeatedly stated earlier, “it is appropriate for Japan to patiently continue the current loose monetary policy.” Markets usually react noticeably to Kuroda’s speeches. For sure, he will again touch upon the topic of monetary policy during his speech, which will cause an increase in volatility not only in yen trading, but throughout the Asian and global financial markets.
If bank officials decide that the Japanese economy is stable and inflation momentum towards the 2% target is not diminishing, they will refrain from changing policy.
06:00 JPY Bank of Japan press conference
During the press conference, head of the Bank of Japan Haruhiko Kuroda will comment on the bank’s monetary policy. Despite earlier measures taken by the bank to stimulate the Japanese economy, inflation remains low, production and consumption are falling, which negatively affects export-oriented Japanese manufacturers. Markets usually react noticeably to Kuroda’s speeches. If he touches on the topic of monetary policy during his speech, volatility will increase not only in trading in the yen, but throughout the Asian and global financial markets.
07:00 GBP Consumer Price Index. Core Consumer Price Index
Consumer Price Index (CPI) reflects the dynamics of retail prices for a group of goods and services included in the British consumer basket. The CPI index is a key indicator of inflation. Its publication causes active movement of the pound in the foreign exchange market, as well as the index of the London Stock Exchange FTSE100.
In the previous reporting month (in November), the growth in consumer inflation amounted to +0.4%, +10.7% (in annual terms). The data suggests that inflationary pressures are still high, which is likely to support the pound. A value of the indicator below the forecast/previous value could provoke a weakening of the pound, as low inflation will force the Bank of England to maintain an easy monetary policy.
Core Consumer Price Index (Core CPI) is published by the Office for National Statistics and determines the change in prices of a selected basket of goods and services (excluding food and energy) over a given period. It is a key indicator for assessing inflation and changing consumer preferences. A positive result strengthens the GBP, a negative result weakens it.
In November, Core CPI (in annual terms) increased by +6.3%. It is likely that the publication of the indicator will have a positive impact on the pound in the short term if its value is higher than the forecast and previous values. The indicator value below the forecast and/or previous values may provoke a weakening of the pound.
13:30 USD Retail sales. Retail control group
This report (Retail Sales) reflects the total sales of retailers of all sizes and types. The change in retail sales is the main indicator of consumer spending. The report is a leading indicator and data may be heavily revised in the future. A high result strengthens the US dollar, a low result weakens it. A relative decrease in the indicator may have a short-term negative impact on the dollar, and an increase in the indicator will have a positive effect on the USD. In the previous month (November), the value of the indicator was -0.6%, (against +1.3%, 0%, +0.3%, 0%, +0.8%, -0.1%, +0, 7%, +1.4%, +0.8%, +4.9% in the previous months of 2022).
Retail sales is the main indicator of consumer spending in the US showing the change in retail sales. The Retail Control Group measures volume across the entire retail industry and is used to calculate price indices for most products. A high result strengthens the US dollar, and vice versa, a weak report weakens the dollar. A slight increase in indicators is unlikely to accelerate the growth of the dollar. The data is worse than the values of the previous period (-0.2%, +0.7%, +0.4%, 0%, +0.8%, +0.7%, -0.3%, +0.5% , +1.1%, -0.9%, +6.7% in January 2022) could negatively impact the dollar in the short term.
Thursday, January 19
00:30 AUD Employment rate. Unemployment rate
The employment rate reflects the monthly change in the number of employed Australian citizens. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value is positive for the AUD, while a low value is negative. Previous values of the indicator: +64,000 in November, +32,200 in October, +900 in September, +33,500 in August, -40,900 in July, +88,400 in June, +60,600 in May, +4,000 in April, +17,900 in March, + 77,400 in February, +12,900 in January 2022.
Also at the same time, the Australian Bureau of Statistics will publish a report on the unemployment rate – this indicator assesses the ratio of the unemployed population to the total number of able-bodied citizens. The growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. The decrease in the indicator is a positive factor for the AUD.
Forecast: Unemployment in Australia remained at its lowest level in December at 3.3% (against 3.4% in November and October, 3.5% in September and August, 3.4% in July, 3.5% in June , 3.9% in May and April, 4.0% in March and February, 4.2% in January) approaching pre-coronavirus levels, and the employment rate rose by another +50,000 Australian workers.
The RBA officials have repeatedly stated that in addition to the situation in international trade, the Australian economy and the central bank’s monetary policy plans are affected by indicators of the level of debts and household spending, growth in wages of workers, as well as the state of the country’s labor market. If the values of the indicators turn out to be worse than the forecast, then the Australian dollar may decline significantly in the short term. Better-than-expected data will strengthen the AUD in the short term.
Friday, January 20
01:15 CNY People’s Bank of China decision on the interest rate
Since May 2012, the People’s Bank of China has been steadily lowering the interest rate, providing support to Chinese manufacturers. The last time the bank lowered the rate was in August 2022 (by 0.1% to 3.65% at the moment).
In 2020, in the context of international trade conflicts and a slowdown in the global economy, the world’s largest central banks took the path of easing their monetary policies in order to support national economies and increase the competitiveness of goods exported from these countries.
The People’s Bank of China is also in line with this process. The depreciation of the yuan has become especially relevant in the last 4-5 years, when the confrontation between the two most powerful economies in the world began. One of the measures to offset the negative consequences of increased duties on the import of Chinese goods into the United States was the depreciation of the national currency of China. Such a measure was intended, among other things, to maintain the previous volumes of imports of Chinese products to the United States, which would be cheaper for American buyers due to the difference in the exchange rates of the national currencies of the United States and China.
Coronavirus has become an additional strong negative factor.
Probably, at this meeting, the People’s Bank of China will keep the interest rate at the same level of 3.65%, although unexpected decisions are not ruled out.
If the People’s Bank of China makes unexpected statements or decisions, volatility could increase throughout the financial market. Investors will also be interested in the bank’s assessment of the consequences of the coronavirus for the Chinese economy and its policies in the near future.
13:30 CAD Retail sales index
The Retail Sales Index is published monthly by Statistics Canada and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the short term. The growth of the index is usually a positive factor for the CAD; a decrease in the indicator will negatively affect the CAD. The previous value of the index (for October) +1.4%. If the data for November is weaker than the forecast and / or the previous value, the CAD may drop sharply in the short term.
Price chart of EURUSD in real time mode
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