Review of the main events of the Forex economic calendar for the next trading week (30.01.2023 – 05.02.2023)
Thanks to the strengthening on Thursday and Friday, the dollar managed to end the week in positive territory with its DXY index demonstrating a modest gain of about 20 points. The past week, which was the last full trading week of the month, turned out to be extremely volatile and full of releases of important macro statistics. Next week promises to be no less interesting, with plenty of trading opportunities. In its course, the world’s 3 largest central banks (the Fed, the Bank of England, the ECB) will decide on interest rates. From the ECB and the Bank of England, market participants expect an increase in interest rates by 0.50%, but from the Fed – only by 0.25%. The leaders of the US Central Bank may go for the same increase in March, but then they will probably take a break to assess the impact of the measures taken on inflation and the economy. The probability of such moves is estimated by market participants at about 70%, according to CME Group. This development puts pressure on the dollar, despite the very positive macro data coming out of the US lately.
The next week will end with the publication of key data from the US labor market: the US Department of Labor will present a monthly report for January. In addition, next week, market participants will pay attention to the publication of important macro statistics from Germany, the Eurozone, New Zealand, and China.
* during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.
** GMT time
Monday, January 30
07:00 EUR Germany GDP for the 4th quarter (preliminary release)
GDP is considered the most important indicator of the overall health of the economy. The growing trend of the GDP indicator is considered positive for the national currency. The German economy is the locomotive of the entire European economy. A high value of the GDP indicator is considered a positive factor for the EUR, and a low value is considered a negative one.
The growth of the European and German economies slowed down sharply in 2019, and in 2022 the European economy has entered a recession in many respects. The risk of a coronavirus pandemic, and then a military conflict in Ukraine added to domestic political risks after Brexit.
If the GDP data turns out to be weaker than the forecast, this will put even more downward pressure on the euro. Better-than-expected data may strengthen the euro in the short term. However, the risks for the euro are directed towards its further weakening.
Forecast: German GDP growth in the 4th quarter of 2022 was 0%.
Tuesday, January 31
00:30 AUDRetail Sales Index
Retail Sales Index is published monthly by the Australian Bureau of Statistics 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 AUD; a decrease in the indicator will negatively affect the AUD. Previous index value (for November) was +1.4% (after a decrease of -0.2% and growth of +0.6%, +0.6%, +1.3%, +0.2% in previous months, in April by +0.9%, in March by +1.6%, in February and January 2022 by +1.8%). If the data turns out to be weaker than the previous value, the AUD may drop sharply in the short term, but if it’s above the previous values, the AUD is likely to strengthen.
Forecast for December: -0.3%.
01:00 CNY China Manufacturing and Services PMI from the China Logistics and Procurement Federation (CFLP)
This indicator is an important indicator of the state of the Chinese economy as a whole. A result above 50 is seen as positive and strengthens the CNY, while one below 50 is negative for the yuan. Previous values: 47.0 in November, 49.2 in October, 50.1 in September, 49.4 in August, 49.6 in May, 47.4 in April, 50.2 in February, 50.1 in January .
The relative growth of the index and the value of 50 should have a positive effect on the CNY. The data above the value of 50 indicate an increase in activity, which has a positive effect on the quotes of the national currency. Otherwise, and if the value of the indicator is below 50, the yan will be under pressure and probably will decrease. Forecast for December: 49.7.
Services PMI assesses the state of the services sector in the Chinese economy. A result above 50 is considered positive and strengthens the yuan. Previous values: 41.6 in November, 48.7 in October, 50.6 in September, 52.6 in August, 47.8 in May, 41.9 in April, 51.6 in February, 51.1 in January .
Despite the relative decline, the indicator is still above 50, which is likely to have a positive impact on the yuan quotes. Otherwise, and if the value of the indicator is below 50, the yuan will be under pressure and probably will decrease.
Forecast for December: 51.0.
07:00 EUR Retail sales in Germany
Retail sales is the main indicator of consumer spending in Germany showing the change in retail sales. A high result strengthens the euro, and vice versa, a low result weakens it. Previous values: +1.1% (-5.9% yoy), -2.8% (-5.0% yoy), +0.9% (-0.9% yoy) , -1.3% (-4.3% YoY), +1.9% (-2.6% YoY), -1.5% (-9.6% YoY), + 1.2% (+1.1% YoY), -5.4% (-0.4% YoY), +0.9% (-1.7% YoY), +0, 2% (+6.9% YoY), -0.2% (+10.1% YoY) in January 2022.
The data speaks of the unstable recovery of this sector of the German economy. Data better than the forecast and / or the previous value is likely to have a positive impact on the euro, but only in the short term. Forecast for December: +0.2% (-4.3% in annual terms).
10:00 EUR Eurozone GDP for the 4th quarter (first estimate)
GDP is considered an indicator of the overall health of the economy. The growing trend of the GDP indicator is considered positive for the EUR; a low result weakens the EUR.
Recently, macro data from the Eurozone have been indicating a gradual recovery in the growth rate of the European economy after a sharp drop in early 2020.
Thus, according to the forecast of economists, the Eurozone GDP is expected to have contracted in the 4th quarter of 2022 by -0.1%, but seen an increase of +2.2% in annual terms after an increase of +0.7% (+4.0% in yoy) in 3Q, +0.8% (+4.1% yoy) in 2Q 2022, +0.6% (+5.4% yoy in 1st Q4, +0.3% (+4.6% YoY) in Q4, +2.2% (+3.9% YoY) in Q3, +2.2% (+14.3% YoY) in Q2 and down -0.3% (-1.3% YoY) in Q1 2021.
If the data turns out to be weaker than the forecast and / or previous values, the euro may decline. Better-than-expected data may strengthen the euro in the short term, although the full recovery of the European economy, even to pre-crisis levels, is still far away.
Preliminary estimate for the 4th quarter: -0.1% (+2.2% in annual terms).
13:00 EUR Harmonized Index of Consumer Prices (HICP) in Germany (preliminary 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, a negative result weakens it.
Previous indicator values: +9.6% in December, +11.3% 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 year (in annual terms). If the data for January turns 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 mounting inflationary pressures in Germany, which in turn is putting pressure on the ECB to tighten its monetary policy. Data worse than the previous value will have a negative impact on the euro.
Forecast: +10.0% in January.
21:45 NZD Employment rate. Unemployment rate (Q4)
The employment rate reflects the quarterly change in the number of employed New Zealanders. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value is positive for NZD, while a low value is negative.
Previous values: +1.3% in Q3, 0% in Q2 2022, +0.1% in Q1 and Q4, +2.0% in Q3, +1.0% in Q2, +0.6% in Q1 2021.
Also at the same time, the New Zealand Bureau of Statistics publishes a report on the unemployment rate – an indicator that assesses the share of the unemployed population to the total number of able-bodied citizens. Growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. A decrease in the indicator is a positive factor for the NZD.
Forecast: New Zealand unemployment in Q4 2022 was at 3.3% (against 3.3% in Q2 and Q3, 3.2% in Q1 and Q4, 3.4% in Q3, 4.0% in Q2, 4.7% in Q1 2021).
If other indicators of the New Zealand Bureau of Statistics report come out with a deterioration, this is likely to negatively affect the NZD. Worse-than-expected data will have an even stronger negative impact on the NZD.
Wednesday, February 1
10:00 EUR Consumer Price Index. Core Consumer Price Index (preliminary release)
Consumer Price Index (CPI) is published by Eurostat and measures the change in prices of a selected basket of goods and services over a given period. The index is a key indicator for assessing inflation and changing consumer preferences. A positive result strengthens the EUR, a negative result weakens it.
Previous values: +9.2% in December, +10.1% in November, +10.6% in October, +9.9% in September, +9.1% in August, +8.6% in June , +8.1% in May, +7.4% in April and March, +5.9% in February, +5.1% in January, +5.0% in December. If the data turns out to be worse than the forecast, the euro may short-term, but sharply decline. Data better than the forecast and / or the previous value may strengthen the euro in the short term. The target level of consumer inflation of the ECB is slightly below 2.0%, and the data indicate an acceleration of inflation in the Eurozone.
Core Consumer Price Index (Core CPI) determines the change in prices of a selected basket of goods and services over a given period and is a key indicator for assessing inflation and changing consumer preferences. Food and energy are excluded from this indicator for a more accurate estimate. A high result strengthens the EUR, while a low result weakens it. In January 2022, Core CPI increased by +2.3%, in February – by +2.7%, in March – by +2.9%, in April – by +3.5%, in May – by +3 .8%, in June – by +3.7%, in August – by +4.3%, in September – by +4.8%, in October – by +5.0%, in November – by +5 .0%, in December – by +5.2%.
If the data for January 2023 turns out to be worse than the previous value or forecast, this may negatively affect the euro. If the data turns out to be better than the forecast or the previous value, the euro is likely to react with an increase. Core inflation in the Eurozone is accelerating, which is positive (under normal economic conditions) for the euro.
13:15 USD ADP National Employment Report
Usually, the ADP report on the level of employment in the private sector has a strong impact on the market and dollar quotes. An increase in the value of this indicator has a positive effect on the dollar. The US private sector is expected to grow by 86,000 in January (against April, 425,000 in March, 375,000 in February, 372,000 in January 2022, by 807,000 in December, 534,000 in November, 571,000 in October, 568,000 in September, 374,000 in August, 330,000 in July, 692,000 in June, 978,000 in May, 742,000 in April, 517,000 in March, 117,000 in February, 174,000 in January 2021). The relative growth of the indicator may have a positive impact on the dollar quotes, and the relative decline of the indicator can affect it negatively. The market reaction may be negative, and the dollar may decline if the data also turns out to be worse than the forecast.
Millions of Americans have previously been laid off due to the coronavirus pandemic and related quarantine measures. Most of the layoffs were concentrated in the tourism and retail sectors. Other important sectors of the economy also suffered. The ADP previously reported that the most significant drop in employment was recently recorded in the construction sector and the financial services sector.
Although the ADP report does not have a direct correlation with the US Department of Labor official data on the labor market, which will be published on Friday, the ADP report is often its harbinger, having a noticeable impact on the market.
15:00 USD US Manufacturing PMI (from ISM)
The US Manufacturing PMI published by the Institute for Supply Management (ISM) is an important indicator of the state of the US economy as a whole. A result above 50 is considered positive and strengthens the USD, while one below 50 is considered negative for the US dollar.
Forecast: 48.2 in January (against 48.4 in December, 49.0 in November, 50.2 in October, 50.9 in September, 52.8 in August, 53.0 in June, 56.1 in May , 55.4 in April, 57.1 in March, 58.6 in February, 57.6 in January). The index is above the level of 50 and, despite the relative decline, has a relatively high value, which is likely to support the dollar. The data above the value of 50 indicate an acceleration of activity, which has a positive effect on the quotes of the national currency. If the indicator falls below the forecast and especially below the value of 50, the dollar may sharply weaken in the short term.
19:00 USD The Fed’s interest rate decision. The Fed’s monetary policy statement
In 2020, the dollar was declining, because investors were withdrawing funds from safe-haven assets, buying riskier and more profitable assets of the stock market, which continued to grow despite the threat of a second wave of the coronavirus epidemic and the associated economic slowdown. The role of the dollar as a defensive asset also declined. However, in 2021 the situation has changed – the dollar strengthened. Now market participants are waiting for the US central bank to continue the cycle of tightening monetary policy, but at an even slower pace.
As expected, at this meeting the rate will be raised again (by 0.25% to 4.75%). During the publication of the rate decision, volatility may rise sharply throughout the financial market, primarily in the US stock market and in dollar quotes, especially if the rate decision differs from the forecast or unexpected statements are made by the Fed leaders.
Powell’s comments could affect both short-term and long-term USD trading. A more hawkish stance on the Fed’s monetary policy is seen as positive and strengthens the US dollar, while a more cautious stance is seen as negative for the USD. Investors want to hear Powell’s opinion on the Fed’s plans for this year.
19:30 USD Press conference of the FOMC (Federal Open Market Committee of the US Federal Reserve)
The press conference of the Federal Open Market Committee of the US Federal Reserve lasts about an hour. The first part presents the ruling, followed by a series of questions and answers that can increase market volatility. Any unexpected statements by Powell on the Fed’s monetary policy will cause an increase in volatility in dollar quotes and in the US stock market.
Thursday, February 2
12:00 GBP Bank of England interest rate decision. Minutes of the meeting of the Bank of England. Planned volume of asset purchases by the Bank of England. Monetary Policy Report
At the December meeting, the Bank of England unexpectedly raised its key interest rate to 0.25%, becoming the first leading central bank to increase the cost of borrowing since the start of the coronavirus pandemic. In February, the interest rate was raised to 0.50%, in March to 0.75%, in May to 1.00%, and in December to 3.50%. Members of the Monetary Policy Committee felt that raising the cost of borrowing in a strong labor market to curb price increases was entirely appropriate. At the same time, further tightening of monetary policy may be required to bring inflation to the target level of 2.0%.
It is expected that at this meeting the Bank of England will again raise the interest rate to 4.0%. However, despite the high level of inflation in the country and the fact that positive macro data is coming from the UK, the interest rate may remain at the same level of 3.50%, given the situation in Ukraine. Such a decision could cause a weakening of the pound.
Also at this time, the minutes of the Monetary Policy Committee (MPC) of the Bank of England are published with the votes “for” and “against” the increase / decrease in the interest rate. The main risks for the UK after Brexit are associated with expectations of a slowdown in the country’s economic growth, as well as with a large current account deficit in the UK’s balance of payments.
The intrigue about the further actions of the Bank of England remains. And in trading the pound and FTSE100 index futures, there are plenty of trading opportunities during the publication of the bank’s rate decision.
Also at the same time we expect the publication of the report of the Bank of England on monetary policy containing an assessment of economic prospects and inflation. At this time, the volatility in the pound quotes can rise sharply. One of the main benchmarks for the Bank of England regarding the prospects for monetary policy in the UK, in addition to GDP, is the inflation rate. If the tone of the report is soft, then the British stock market will receive support, and the pound will fall. Conversely, the report’s tough rhetoric on curbing inflation, which implies a further increase in the interest rate in the UK, will lead to a strengthening of the pound.
12:30 GBP Speech by Bank of England Governor Andrew Bailey
Financial market participants are waiting for Andrew Bailey to clarify the situation regarding the future policy of the UK central bank. Volatility usually rises sharply during speeches by the head of the Bank of England in the quotes of the pound and the FTSE London Stock Exchange index if he gives any hints of tightening or easing monetary policy of the Bank of England. Probably, Andrew Bailey will also give explanations regarding the decision made by the Bank of England on the interest rate and touch upon the state and prospects of the British economy after Brexit against the backdrop of a sharp rise in energy prices and inflation. If Bailey does not touch on monetary policy issues, the reaction to his speech will be weak.
13:15 EUR ECB interest rate decision
The ECB will publish its decision on the key rate and on the deposit rate. The ECB’s tight stance on inflation and the level of key interest rates contributes to the strengthening of the euro, a soft position and rate cuts weaken the euro. Given the high level of inflation in the Eurozone, according to the ECB management, the balance of risks for the economic outlook for the Eurozone “remains skewed to the negative side.”
“The Governing Council believes that interest rates will still need to be raised significantly … in order to ensure a timely return of inflation to a medium-term target of 2%,” the ECB said in a statement following the December meeting.
Speaking at the World Economic Forum in Davos in January 2023, the ECB President Christine Lagarde said that “inflation expectations are not easing” and “the ECB will continue to raise rates.” In her opinion, “inflation is too high”, and “the ECB intends to bring it down to 2% in a timely manner.”
The ECB believes that GDP growth may decline, including due to the energy crisis in the EU, high uncertainty, weakening global economic activity and tightening financing conditions. However, the recession should not drag on too long, although strong growth is not expected either.
“In the near future, growth will recover as the current headwinds ease. Overall, Eurosystem staff forecast economic growth of 3.4% in 2022, 0.5% in 2023, 1.9% in 2024 and 1.8% in 2025,” said the statement based on the results of the December meeting.
Thus, if we follow this signal from the head of the ECB, as a result of this meeting, the key interest rate will be raised again, most likely by 0.25%, but other, tougher decisions are possible too (increase by 0.5% or even by 0.75%). The ECB deposit rate for commercial banks is also likely to be raised.
Well, since inflation in the Eurozone is still unacceptably high for the leaders of the ECB, they may announce an increase in interest rates at the next meetings.
Perhaps this will also be mentioned in the accompanying statements of the leaders of the ECB.
13:45 EUR Press conference of the ECB. ECB Monetary Policy Statement
The press conference will be of major interest to market participants. In its course, a surge in volatility is possible not only in euro quotes, but also in the entire financial market, if the ECB leaders make unexpected statements. The ECB leaders will assess the current economic situation in the Eurozone and comment on the bank’s decision on rates. In previous years, as a result of some meetings of the ECB and subsequent press conferences, the euro exchange rate changed by 3% -5% in a short time.
A soft tone of statements will have a negative impact on the euro. And, on the contrary, a tough tone of the speech of the ECB management regarding the monetary policy of the central bank will strengthen the euro.
Friday, February 3
13:30 USD Average hourly wages. Non-farm Payrolls. Unemployment rate
These are the most important indicators of the state of the labor market in the US in January. Forecast: +0.3% (against +0.3% in December, +0.6% in November, +0.4% in October, +0.3% in September and August, +0.5% in July , +0.3% in June, May and April, +0.4% in March, 0% in February, +0.7% in January 2022, +0.6% in December, +0.3% in November, +0.4% in October, +0.6% in September and August 2021) / +0.175 million (against +0.233 million in December, +0.263 million in November, +0.261 million in October, +0.263 million in September, +0.315 in August, +0.528 million in July, +0.372 million in June, +0.390 million in May, +0.428 million in April, +0.431 million, +0.678 million in February, +0.467 million in January 2022, + 0.199 million in December, +0.210 million in November, +0.531 million in October, +0.194 million in September, +0.235 million in August 2021) / 3.6% (against 3.5% in December, 3.7% in November and October, 3.5% in September, 3.7% in August, 3.5% in July, 3.6% in June, May, April and March, 3.8% in February, 4.0% in January 2022, 3.9% in December, 4.2% in November, 4.6% in October, 4.8% in September, 5.2% in August 2021), respectively.
In general, the indicators can be described as quite positive, if not encouraging, apart from the NFP section. Market participants may sharply react negatively to its weak value. Nevertheless, it is often difficult to predict the market reaction to the publication of indicators, because many indicators for previous periods are subject to revision. Now it will be even more difficult to do this, since the economic situation in the US and many other major economies remains controversial with increased risks of recession and high inflation. In any case, when the data from the US labor market is published, a surge in volatility is expected in trading not only in USD, but throughout the financial market. Cautious investors might prefer to stay out of the market during this period of time.
15:00 USD US Services PMI (from ISM)
This indicator assesses the state of the services sector in the US economy. These services sectors (unlike the manufacturing sector) have virtually no impact on the country’s GDP.
A result above 50 is seen as positive for the USD. Forecast for January: 53.0 (against 49.6 in December, 56.5 in November, 54.4 in October, 56.9 in August, 56.7 in July, 55.3 in June, 55.9 in May , 57.1 in April, 58.3 in March, 56.5 in February, 59.9 in January, 62.0 in December), which is likely to have a generally positive impact on the USD. However, the relative decline of the index, and especially below the value of 50, may negatively affect the dollar in the short term.
Price chart of EURUSD in real time mode
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