Central Bankers And Job Details To Offer Another Volatile Week

Februari 01, 2016 13:55

With a surprise negative rate announcement by the BoJ and dovish messages from the ECB and BoE heads, market players' attention again shifted towards the monetary policy divergence between the US Federal Reserve and rest of the major central banks, helping the US Dollar Index (I.USDX) to close the week on a flat note even if headline economic details, including Durable Goods Orders, marked soft numbers and the FOMC sound worried about the global inflation hurting their rate-hike path. Moving on, commodity currencies, namely AUD, CAD and NZD, printed positive weekly closing against its US counterpart due to pullback in commodity prices, headed by Crude bounce, while no rate-cut by the RBNZ provided additional support to the NZD.

After major central bankers helped magnifying the Forex volatility during last week, job details from US, Canada & New-Zealand and monetary policy meetings of the RBA & the BoE, together with BoE's Quarterly Inflation Report (QIR), could take those liquid moves a step forward. Moreover, headline PMI announcements from the US & the UK, in addition to the ECB President's testimony, are some other details/events that could make forex traders busy throughout the upcoming week.

Job Details Are What The USD Traders Would Be Concerned About

While monetary policy divergence helped the greenback ignore last week's soft data-points, January month labor market details, namely the Earnings, NFP and the Unemployment Rate, scheduled for Friday release, gain the market attention as soft job numbers might raise another hurdle for the Fed's 1.0% rate-hike plan which seems currently disturbed by global inflation worries.

As can be informed from the aforementioned chart, US NFP has surpassed even the most optimistic expectations for three-consecutive months till Dec. 2015, making the yearly average of 215K while the unemployment rate has also been held steady from Oct. 2015 at 5.0%, the lowest level since May 2008. However, consensus relating to January month reading favors a slide in NFP to 192K, lowest in four months, and one more unchanged print by the Unemployment Rate at 5.0%. Further, the Average Hourly Earnings is likely heading to test three months high with 0.3% growth against 0.0% prior while the early signal for Friday's crucial NFP, the ADP Non-Farm Employment Change, scheduled for Wednesday release, is also expected to test the three month low with 193K print as compared to 257K prior.

Other than the headline labor market numbers, ISM Manufacturing and Non-Manufacturing PMIs, scheduled for respective release on Monday and Wednesday, Factory Orders, up for Thursday release, and the monthly Trade Balance, to be released on Friday, are some other US data-points that could help predict near-term US Dollar moves. While forecast relating to ISM-Manufacturing PMI favors another below-50 mark, with 48.6 against 48.2 prior, and the Non-Manufacturing PMI is expected to print 55.1 number as compared to 55.3 prior, the Factory Orders are likely contracting the steepest in a year with -2.5% versus -0.2% marked last month and the Trade Balance deficit is also expected to widen to -42.9B from its -42.4B prior.

Even as steady Unemployment Rate and higher Earnings, coupled with renewed monetary policy divergence concerns, favor USD strength, soft prints by the NFP and some of the second-tier economic details might hold the greenback's up-move captive.

Draghi's Testimony Can Help Forecast ECB's Next Action

ECB President Mario Draghi, even after being famous for his bold attempts & hawkish tone, has recently spread his concern for global deflation and said that the central bank might not refrain from taking additional measures to safeguard the economy from such threats. The President, who is scheduled to present Testimony before the European Parliament on Monday, may utter some words on monetary policy guidance for the ECB in addition to speaking how the economy have reacted to central bank's measures. Should the testimony be an echo of what the central banker said last week, chances of another monetary policy easing measure announcement in March and an extended EUR downside can't be denied. However, concentration on the ECB's good work and an optimistic tone for the region's future might help the Euro recover some of its recent declines.

In addition to the ECB President's Testimony, monthly reading of German Factory Orders, up for Friday release, becomes the only detail to help foresee EUR moves. The number from the Euro-region's largest economy is expected to test the lowest in three months by printing -0.3% against +1.5% prior, which if matched the consensus, might drag the EUR further down.

BoE Inflation Report And Headline PMIs Could Direct GBP Moves

Bank of England's Quarterly announcement of Inflation Report, QIR, up for Thursday, becomes an eye-catcher for all the GBP participants as the UK currency slid more than 8% since the last announcement was made in November when the central bank sound worried about commodity decline hurting global inflation outlook and downgraded their forecast for near-term growth and inflation. The central bank, alike previous QIR announcement, is also scheduled to hold its monetary policy meeting and release the minutes of the same together with the QIR release. Further, UK Construction & Services PMIs, scheduled for release on Tuesday and Wednesday respectively, become some more important news out of the Britain to predict near-term GBP moves.

Following Monday's UK Manufacturing PMI printed highest level in three months with 52.9 number versus 51.8 consensus and 52.1 prior, the Construction PMI is likely being near the previous release of 57.8 by marking 57.6 while the Services PMI, core to the UK economy, is also expected to remain around the previous 55.5 mark with 55.4 forecasted number.

Considering recently released downbeat UK details, dovish message from the BoE Governor, coupled with another downgraded economic forecast in QIR, can continue extending the GBP's southward trajectory.

Rest Of The Globe Details

Although BoE and US job numbers are likely to gain the most market attention during current week, monetary policy meeting by the Reserve Bank of Australia (RBA), together with the labor market details from Canada and New-Zealand, are rest of the globe details that can continue fueling the Forex liquidity through the upcoming sessions.

RBA, in its monetary policy meeting on Tuesday, is expected stretch the hold on monetary policy for eight consecutive time; however, market players are more likely to observe details of the RBA statement to look for any hints relating to central bank's future monetary policy action as its largest consumer, China, has been struggling off-late. Given the central bank maintains its tone of economic improvement, as it has been, chances of the AUD up-move becomes brighter; though, pessimism at China, as supported by recently released headline PMIs, might restrict further upside of the Australian currency.

Moving forward, quarterly details of New-Zealand Employment Change and Unemployment Rate, out for Tuesday release, in addition to the January month Employment Change and Unemployment Rate from Canada, scheduled for Friday, are the numbers that could help foresee near-term trend of the NZD and CAD respectively. While the New-Zealand Unemployment rate is expected to print 6.1%, the highest levels since the data was released in November 2013, against 6.0% prior, the Canadian Unemployment is likely remaining constant at 7.1%. However, consensus relating to the Canadian Employment Change favors a lower print of 5.4K against 2.8K prior while the same release from New-Zealand is expected to test the highest level in four quarters with 0.8% mark as compared to prior -0.4% reading. While renewed downside pressure of the Crude, Canada's main export, coupled with weaker job details might halt the recent CAD upside, improvement in New-Zealand labor market details can favor the RBNZ's recent announcement of not altering the interest-rate and help the NZD regain its strength.

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