Review of the main events of the Forex economic calendar for the next trading week (23.01.2023 – 29.01.2023)
Thanks to Friday’s momentum, the dollar ended the week in positive territory with the DXY index up about 0.4%. Interestingly, the dollar strengthened at the end of last week against traditional defensive assets – gold, yen, and franc. The US government bonds also gained at the end of last year, helping to strengthen the dollar.
And yet, the dollar remains under pressure. The macro data from the US published earlier last week confirmed the expectations of market participants that at the meeting on January 31 – February 1, the Fed will raise the rate by 0.25%. This will be another slowdown in the Fed’s tightening cycle.
Thus, according to macro data published last week, the volume of industrial production in the United States decreased again (from -0.6% in November to -0.7% in December), and more than forecasted (-0.1%), while the utilization of production capacities was up at 78.8% from 79.4% a month earlier. Producer prices also continued to decline: the index fell in December (to -0.5% against the forecast of -0.1% and the previous value of +0.2% and to 6.2% in annual terms against the forecast of 6.8% and the previous value 7.3%).
Next week, market participants will pay attention to the publication of important macro statistics from the US, Canada, Australia, Germany, the Eurozone, the UK, as well as the results of the meeting of the Bank of Canada, which will decide on the prospects for the bank’s monetary policy.
* during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.
** GMT time
Monday, January 23
No important macro statistics scheduled to be released.
Tuesday, January 24
08:30 EUR Germany Manufacturing PMI according to S&P Global (preliminary release). Composite PMI according to S&P Global (preliminary release)
Manufacturing PMI is an important indicator of the business environment and the general state of the German economy. This sector of the economy forms a significant part of Germany’s GDP. A result above 50 is considered positive and strengthens the EUR, while one below 50 is considered negative for the euro.
Previous monthly values: 47.1, 46.2, 45.1, 47.8, 49.1, 49.3, 52.0, 54.8, 54.6, 56.9, 58.4, 59, 8, 57.4, 57.4, 57.8, 58.4, 62.6, 65.9, 65.1, 64.4, 66.2, 66.6, 60.7, 57.1, 58.3, 57.8. The growth of the indicator above the previous values will support the euro (in the short term). Data worse than the forecast and / or the previous value will have a negative impact on the euro.
Composite PMI is an important indicator of business conditions and the overall health of the German economy. A result above 50 is considered positive and strengthens the EUR, while one below 50 is considered negative for the euro. Previous monthly values: 49.0, 46.3, 45.1, 45.7, 46.9, 48.1, 51.3, 53.7, 54.3, 55.1, 55.6, 49, 9, 52.2, 52.0, 55.5, 60.0, 62.4, 60.1, 56.2, 55.8, 57.3, 51.1, 50.8, 52.0, 51.7. Data worse than the forecast and / or the previous value will have a negative impact on the euro.
09:00 EUR Eurozone Composite Manufacturing PMI according to S&P Global (preliminary release)
Manufacturing PMI is an important indicator of the state of the entire European economy. A result above 50 is considered positive and strengthens the EUR, while one below 50 is considered negative for the euro. Previous monthly values: 49.3, 47.8, 47.3, 48.1, 48.9, 49.9, 52.0, 54.8, 55.8, 54.9, 55.5, 52.3, 53.3, 55.4, 54.2, 56.2, 59.0, 60.2, 59.5, 57.1, 53.8, 53.2, 62.5, 48.8, 47.8, 49.1, 45.3. Data worse than the forecast and / or the previous value will have a negative impact on the euro.
09:30 GBP UK Services PMI according to S&P Global (preliminary release)
Services PMI is an important indicator of the state of the British economy. The services sector employs the majority of the UK’s working-age population and contributes approximately 75% of GDP. The most important part of the services industry is still financial services. If the data turns out to be worse than the forecast and the previous value, the pound is likely to fall sharply in the short term. Data better than the forecast and the previous value will have a positive impact on the pound. At the same time, a result above 50 is considered positive and strengthens the GBP, while one below 50 is considered negative for the GBP.
Previous values of the indicator: 49.9 in December, 48.8 in November, 48.8 in October, 50.0 in September, 50.9 in August, 52.6 in July, 54.3 in June, 53.4 in May, 58.9 in April, 62.6 in March, 60.5 in February, 54.1 in January, 53.6 in December, 58.5 in November, 59.1 in October, 55.4 in September, 55.0 in August, 59.6 in July, 62.4 in June 2021 after falling to levels of 29.0 in May, 13.4 in April, 34.5 in March 2020.
21:45 NZD CPI (Consumer Price Index) for the 4th quarter
Consumer Price Index (CPI) is a key indicator for assessing inflation and reflects the dynamics of retail prices for a group of goods and services included in the consumer basket. A positive result strengthens the NZD, a negative result weakens it. Previous CPI values (annualized): +7.2% in Q3, +7.3% in Q2, +6.9% in Q1 2022, +5.9% in Q4 2021, +4.9% in Q3 2021, +3.3% in Q2 2021, +1.5% in Q1 2021. A relative decrease in the indicator and a value below the forecast may negatively affect the NZD quotes. Forecast for the 4th quarter of 2022: +7.1% (annualized).
Wednesday, January 25
00:30 AUD RBA Trimmed Mean Core Inflation Index by (4th quarter). Consumer Price Index (4th quarter)
This indicator is published by the RBA and the Australian Bureau of Statistics. It reflects the dynamics of retail prices for goods and services included in the consumer basket. The simple trimmed mean method takes into account the weighted average kernel, the central 70% of the index components. Previous index values: +1.8% (+6.1% YoY) in Q3, +1.5% (+4.9% YoY) in Q2 2022, +1 .4% (+3.7% YoY) in Q1 2022, +1.0% (+2.6% YoY) in Q4, +0.7% (+2 .1% YoY) in Q3, +0.5% (+1.6% YoY) in Q2, +0.3% (+1.1% YoY) in 1st quarter of 2021.
According to the forecast, it is expected that the value of the indicator for the 4th quarter of 2022 will be +1.9% (+6.7% in annual terms).
While this is still a weak value, the data points to mounting inflationary pressures. If the value of the indicator turns out to be worse than the forecast, this is likely to have a negative impact on the AUD. The growth of the indicator above the forecast should have a positive impact on the AUD in the short term.
Consumer Price Inflation Index (CPI) published by the RBA and the Australian Bureau of Statistics evaluates the dynamics of retail prices for goods and services in Australia. CPI is the most significant indicator of inflation and changes in consumer preferences. A high value is positive for the AUD, while a low value is negative. Previous values: +1.8% (+7.3% YoY) in Q3, +1.8% (+6.1% YoY) in Q2 2022, +2.1% (+5.1% YoY) in Q1 2022, +1.3% (+3.5% YoY) in Q4, +0.8% (+3 .0% YoY) in Q3, +0.8% (+3.8% YoY) in Q2, +0.6% (+1.1% YoY) in 1st quarter of 2021.
According to the forecast, it is expected that the value of the indicator for the 4th quarter of 2022 will be +1.7% (+7.2% in annual terms).
The Australian central bank’s CPI inflation target is in the range of 2% – 3%. As follows from the minutes of a recent RBA meeting, in order to return inflation to the target level, “further interest rate increases will be required over time”, and “further steps are needed in the coming months to normalize monetary conditions in Australia.”
It is worth noting that earlier, the minutes of the RBA said that “the Central Bank will not raise rates until it reaches the CPI inflation target of 2-3% on a sustainable basis. It won’t happen before 2024.” It seems that the situation has changed, and now the RBA, like most other major world central banks, is facing the problem of accelerating inflation.
The expected positive value of the indicator is likely to support the AUD. If the indicator comes out with a value worse than the forecast, this will negatively affect the AUD in the short term.
15:00 CAD Bank of Canada’s interest rate decision. Bank of Canada’s accompanying statement
The Bank of Canada will decide on the interest rate. In March 2020, the bank cut the rate 3 times, bringing it to the level of 0.25%, to mitigate the economic damage from the novel coronavirus pandemic.
In the accompanying statement, Canada’s central bank said the “decision is aimed at supporting the financial system, which plays a central role in lending to the economy, as well as laying the foundation that will allow the economy to return to normal.” The central bank’s press release also said that the spread of the coronavirus and the sharp drop in global oil prices are collectively putting severe pressure on Canadians and the Canadian economy.
In fact, quantitative easing and a significant reduction in the interest rate should contribute to the weakening of the national currency.
The negative effects of the coronavirus on the Canadian economy and the country’s labor market, as well as the weakness of the housing market, still put pressure on the Bank of Canada to maintain an easy monetary policy. However, following the results of the meetings held in 2022, the Bank of Canada decided to raise the interest rate (to 4.25% at the moment) and spoke in favor of its further increase. The Bank of Canada now expects GDP and consumer price index (CPI) growth to be stronger this year than previously expected. Bank officials also acknowledged that the uncertainty caused by Russia’s special military operation in Ukraine could dampen economic growth and fuel inflation.
There is still a chance that at the meeting on Wednesday the Bank of Canada will again raise the interest rate. Tough tone of the Bank of Canada’s accompanying statement regarding rising inflation and prospects for further tightening of monetary policy will cause the strengthening of the Canadian dollar. If the Bank of Canada signals the need for loose monetary policy, the Canadian currency will decline.
16:00 CAD Press conference of the Bank of Canada
During the press conference, head of the Bank of Canada Tiff Macklem will explain the bank’s position and assess the current economic situation in the country. If the tone of his speech is tough on the monetary policy of the Bank of Canada, the Canadian dollar will strengthen in the foreign exchange market. If Macklem speaks in favor of loose monetary policy, the Canadian currency will decline. In any case, high volatility in the CAD quotes is expected during his speech.
Thursday, January 26
13:30 USD Durable goods prders. Capital goods orders (ex defense and aviation). US Annual GDP for the 4th quarter (preliminary estimate)
This indicator reflects the value of orders received by producers of durable goods and capital goods (capital goods are durable commodities used to produce durable goods and services) involving large investments. Goods produced in the defense and aviation sectors of the US economy are not included in this indicator. A high result strengthens the USD.
Previous values of the indicator “Durable goods orders”: -2.1% in November, +1.1% in October, +0.4% in September, -0.2% in August, -0.1% in July , +2.2% in June, +0.8% in May, +0.4% in April, +0.6% in March, -1.7% in February, +1.6% in January.
Previous values of the indicator “Capital goods orders ex defense and aviation”: +0.2% in November, +0.6% in October, -0.4% in September, +1.3% in August, +0. 3% in July, +0.9% in June, +0.6% in May, +0.3% in April, +1.1% in March, -0.3% in February, +1.3% in January.
In theory, the relative growth of the indicator has a positive impact on the dollar, and the decline of the indicator is negative. The market reaction to its negative value may also be negative for the dollar in the short term. Data worse than the previous value and/or the forecast will also have a negative impact on dollar quotes.
Better-than-expected data will have a positive impact on the dollar.
Forecast for December: +2.5% and 0%, respectively.
GDP data is one of the key indicators (along with data on the labor market and inflation) for the Fed in terms of its monetary policy. A strong result strengthens US dollar; a weak report on GDP has a negative impact on the US dollar. In the previous 3rd quarter, GDP grew by +3.2%, after falling by -0.6% in the 2nd quarter, -1.6% in the 1st quarter, an increase of +6.9% in the 4th Q3 2021, +2.3% in Q3, GDP grew by +6.7% in Q2, and +6.3% in Q1 2021. If the data points to a decline in GDP in the 4th quarter of 2022, the dollar will come under strong pressure. Positive data on GDP will support the dollar and US stock indices. Forecast (preliminary estimate): +2.8%.
Friday, January 27
No important macro statistics scheduled to be released.
Price chart of EURUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.