Forex Major Currencies Outlook (Jan 7 – Jan 11)

This is the lowest reading since September of 2017. Employment category fell to 52.7 vs 55.3 the previous month which is the lowest reading since June of 2017. New orders also showed decline to 54.3 vs 56.7 the previous month. This level is lowest since September 2017. ISM Manufacturing Index came in at 54.1 vs 57.5 as expected with prior reading showing 59.3. This is the biggest drop since 2008. All major categories showed declines with New Orders leading the way with 51.1 vs 62.1 the prior month. Employment figure came in at 56.2 vs 58.4 the previous month. Since PMI is a leading indicator this brings a bit of worry and raises questions regarding the strength of the labour market.

ADP employment report showed that 271k new jobs were added in the US economy for the month of December vs 179k as expected. ADP report once again showed a high correlation with NFP as headline NFP came in at 312k completely smashing expectations of 170k. Unemployment ticked up to 3.9% due to the rise in participation rate to 63.1% which is highest since 2014. Average hourly earnings came in at 0.4% m/m vs 0.3% m/m as expected and at 3.2% y/y vs 3% y/y as expected.

This week we will have inflation data (CPI), FOMC minutes from December’s meeting, trade balance data and non-manufacturing PMI data.

Important news for USD:

Monday:

• Factory Orders
• ISM Non-Manufacturing PMI

Tuesday:

• Trade Balance
• Export
• Import

Wednesday:

• FOMC Minutes

Friday:

• CPI
• Federal Budget Balance

EUR

The final Manufacturing PMI for the month of December for the Eurozone came in at 51.4 as expected. Contractions were seen in France, probably due to “gilet jaunes” Yellow vest movement and in Italy where the number shows contraction for the third consecutive month. Overall the manufacturing PMI of the Eurozone shows steady decline since the beginning of 2018. Services PMI came in at 51.2 and Composite PMI came in at 51.1. Both numbers came below preliminary readings with Italy and Spain beating the preliminary reading while Germany and France missed.

Preliminary CPI data for the month of December came in at 1.6% y/y vs 1.7% y/y as expected. Drop in the headline figure is a worrisome but it can be attributed to the falling oil prices. Core CPI came in at 1% y/y as expected. The fact that core CPI is not dropping is encouraging but it has stayed at 1% for several months and it is a long way from targeted level of 2%.

This week we will have data on consumption and employment as well as sentiment and climate indicators for the Euro area. Additionally, we will have data on industrial production, consumption and trade balance from Germany.

Important news for EUR:

Monday:

• Factory Orders (Germany)
• Retail Sales (Germany)
• Retail Sales

Tuesday:

• Industrial Production (Germany)
• Economic Sentiment Indicator
• Business Climate Indicator

Wednesday:

• Trade Balance (Germany)
• Export (Germany)
• Import (Germany)
• Unemployment Rate

GBP

UK December Manufacturing PMI came in at 54.2 vs 52.5 as expected for a healthy beat. New orders sub-index rose to its highest level since February. This number is helped by stockpiling ahead of the potential no deal Brexit. Services PMI came in at 51.2 vs 50.7 as expected and 50.4 the previous month and Composite PMI came in at 51.4 vs 50.8 the previous month. Decent beat on the data but business expectations category fell to 60.2 from 60.6 the previous month again showing impact that Brexit is having on business conditions in the UK.

This week British Parliament will start working and Brexit deal will be on the agenda. Additionally, we will get data on industrial and manufacturing production as well as trade balance data.

Important news for GBP:

Friday:

• Industrial Production
• Manufacturing Production
• Trade Balance

AUD

China Manufacturing PMI for the month of December came in at 49.4 vs 50 as expected. This puts it into contraction for the first time since July 2016. Non-manufacturing PMI came in at 53.8 vs 53.2 as expected for the composite number of 52.6. New export orders contracted for a seventh straight month. They came in at 46.6 vs 47.0 the previous month. Manufacturing PMI shows signs of deleveraging and less robust growth of the World Economy. Also, it shows that the trade war has had impact on Chinese economy. Caixin PMI, which shows the data for smaller more export-oriented firms, also showed contraction as it came in at 49.7. Slowing of manufacturing process in China could mean less need for import of raw materials which will offset Australia’s exports and weigh negatively on AUD. Final Manufacturing PMI for the month of December for Australia comes in at 54 showing continued expansion in new orders, elevated business conditions and signs of easing inflationary pressures due to lower oil prices. Services PMI data came in at 52.7 vs 53.7 the previous month for a composite number of 52.9. Caixin Services PMI from China came in at 53.9 vs 53 as expected. Positive data from China boosted AUD in the early trading on Friday and AUD was additionally boosted by the announcement of PBOC to cut bank’s RRR rate by 100 bps. The first 50 bps cut will take effect on January 15 and second 50bps cut will be applied from January 25.

This week we will have housing data, data on consumption and trade balance data. Chinese inflation data will also be closely monitored.

Important news for AUD:

Tuesday:

• Trade Balance
• Export
• Import

Wednesday:

• Building Approvals

Thursday:

• CPI (China)

Friday:

• Retail Sales

NZD

GDT Price Index came in at 2.8%. This is the third straight month of rising dairy prices which will surely boost New Zealand’s exports. NZD reacted positively on this news and strengthened against USD but prevailing risk off sentiment will weigh heavily against NZD.

This week we will get housing data from New Zealand.

Important news for NZD:

Thursday:

• Building Consents

CAD

Manufacturing PMI for the month of December came in at 53.6 vs 54.9 as expected. Lowest level since January 2017. Employment category fell to its lowest since May 2018.

Canada employment change came in at 9.3k vs 6.9k estimate. Unemployment and participation rates stayed the same with former coming in at 5.6% and latter coming in at 64.4%. Hourly wage rates remained for permanent employees stayed at the same level of 1.5%. Increases were recorded in manufacturing, transportation and warehousing, as well as in health care and social assistance while declines were in wholesale and retail trade as well as in public administration. Also, part time employment change was 28.3k while full time employment change was -18.9k which will put a dent in this report.

This week centre stage will belong to BOC and their rate decision followed by press conference. It is expected that the rate will stay at 1.75% so the interpretation by BOC members of mixed data, falling oil prices, USMCA deal and effects of US-China trade war will be closely monitored. During the week we will also get Ivey PMI data as well as housing and trade balance data.

Important news for CAD:

Monday:

• Ivey PMI

Tuesday:

• Trade Balance
• Export
• Import

Wednesday:

• BOC Interest Rate Decision
• BOC Rate Statement
• BOC Monetary Policy Report Press Conference
• EIA Crude Oil Stocks Change

Thursday:

• Building Permits 

Important news for JPY:

Monday:

• Nikkei Services PMI

Wednesday:

• Labour Cash Earnings

Thursday:

• BOJ Kuroda Speech

Friday:

• Household Spending
• Current Account
• Goods Trade Balance

Important news for CHF:

Tuesday:

• Unemployment Rate
• Retail Sales

Wednesday:

• CPI

_{You can follow all economic events on the Economic Calendar page on our Website. MT4 server time is set to GMT + 2 and if you need assistance converting MT4 server time to your local time you can use some of the online time converters such as WorldTimeBuddy.}

_{Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets.
Please remember that MT4.VAR. and MT4.ECN. accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.}