Weekly trading forecast February 4 - 8

The first impression of this week’s economic calendar is that there is nothing much to expect from the price action in the financial markets. However, the closer look makes things completely different. The political situation in the United States is not going anywhere and local tensions between political opponents might lead to sudden turmoil in equities. The Brexit outcome is still uncertain and we’re approaching the deadline, so the Sterling traders will monitor the UK headlines closely together with the Bank of England’s interest rates decision. Trade negotiations between the U.S. and China have two more rounds before the March 1 when the recent ceasefire ends, and any potentially negative scenarios might affect the global financial markets this week. Commodity currencies in general, and Australian dollar, in particular, should whether confirm or deny the latest strength versus the US dollar and Japanese yen. The Reserve Bank of Australia has the interest rate decision and economic statement scheduled for this week. macroeconomic data from Eurozone should enlighten EUR traders in the scope of the recent slowdown. US crude oil inventories and OPEC’s meeting - those are vents influencing the price of oil this week. Precious metals could keep climbing this week on the back of the fixed-income market developments.

Monday, February 4.

The Asian trading session is expected to be rather quiet on Monday as Chinese New Lunar Year holiday starts. South Korea, Hong Kong, Singapore and China will be closed for celebrating, so the volatility is predicted to be low. The only interesting event will be Building Approvals report in Australia. The British economy will publish Construction PMI which is expected at the level of 52.4 compared to 52.8 in November. Although the recent housing-market data was robust, It’s hard to expect a positive report as the Manufacturing PMI disappointed investors last week and the British pound dropped. Further weakness might be seen for GBP/USD and other GBP pairs. The European calendar has much more events scheduled. Spain will report Unemployment change, Italy will publish inflation data with Consumer Price Index as the headline, while Eurozone Producer Price Index will be the most crucial data for EUR/USD on Monday. US Cap Goods Ship and Factory Orders should have a limited impact on the greenback during the American trading session.

Tuesday, February 5.

The trading week will continue with the key event for AUD/USD - RBA meeting, rate decision and statement. The volatility is expected to jump three hours before the headline event, as the Australian economy will publish the latest development of imports, exports volume, trade balance surplus and retail sales in December. All of that data should lift the Aussie, especially versus the Japanese yen, if it came in strong. The Reserve Bank of Australia will announce the interest rate decision together with the economic statement at 03:30 AM GMT. Although the financial conditions are widely expected to remain at the same level, any change in the regulator’s rhetoric will affect the Aussie’s price action across the board. A more hawkish tone is predicted by some analysts, as the recent economic data was strong. If that confirmed, AUD/USD could soar to 0.7400 and above. The Services PMI reports will come in for the European Union and Britain. A moderate average decline is forecasted so far but a softer-than-expected data could reinforce the selling pressure on EUR/USD and GBP/USD. The Retail Sales report would add fuel to the fire in the Eurozone as the last week’s German data was weak. Canada will update its trade balance figures in December, while US ISM institute will release its Market Composite and Manufacturing PMI. Another round of the slowdown is likely, so it’s hard to expect the greenback to trade on a stronger fundamental background.

Wednesday, February 6.

As long as the Chinese New Year continues, the only important event to focus on is the RBA Governor Lowe’s press-conference. The Aussie traders will keep a close eye on his comments about the future monetary policy in order to decide how far the speculative demand could go for AUD/USD and AUD/JPY currency pairs. The Central Bank of India will also publish its rate decision and economic projections, which will be important for global emerging markets. German factory orders and EU economic forecasts will be released during the European trading session. The US Retail Sales and GDP reports are scheduled to release on Wednesday, however, both events could be postponed again due to the government shutdown. Anyway, Building Permits and Unit Labour cost reports should influence the price action in the United States. Ivey PMI will be released in Canada and the Loonie bulls will try to catch an additional wave of support from the fundamental side but not only from the price of oil which was fuelling the decline of USD/CAD recently. US Crude Oil inventories are due to release 30 minutes later, so higher volatility is expected for both assets.

Thursday, February 7.

The New Zealand dollar will be in the market’s focus on Thursday amid crucial macroeconomic data to be published -- Unemployment rate, Participation rate and Labour cost index. Economists predict the data to be soft, so it’s hard to expect NZD/USD to rally much North. A positive surprise could change the picture though. Another interesting event is NAB consumer confidence in Australia which is supposed to confirm the Aussie’s strength. German, Spanish Industrial Production, German and French trade balance - those are the main reports in Europe on Thursday. Analysts’ expectations point to the further weakness of the single European currency. The Bank of England also meets on Thursday, but the biggest question is not for a change in the monetary policy and for the vote split (9-0 predicted) but Carney’s rhetoric. BoE governor should bring more light to the regulator’s attitude toward the Brexit process and how would they react to a no-deal hard scenario. The problem is that the Monetary Policy Committee does not have any room for manoeuvre with the current ultra-low level of interest rates. Some opinions are based on the need for preventive measures. Anyway, GBP/USD will be vulnerable to higher volatility on Thursday. US Initial jobless claims are the only report in the American trading session.

Friday, February 8.

The final day of the trading week will start with data from Japan - Household spending, Adjusted Current account and Bank lending. Nothing positive to expect for the Japanese yen, so USD/JPY could test the upper band of the recent range. RBA Monetary policy statement will finalize the trading week for the Australian dollar. French Non-Farm Payrolls and German trade balance reports will be published in Europe. The Loonie traders will stick to Canadian Employment change in January with a slightly weaker consensus, leaving a room for a positive surprise. If the Labour market was able to surprise investors, then USD/CAD could dive deeper toward 1.2800 support level.
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