Forecasting the upcoming week: The Fed, ECB and inflation will rule the sentiment

A dreadful week saw the US Dollar (USD) deepen its retreat from the cycle highs recorded in mid-January, driven by persistent uncertainty surrounding President Trump’s trade and tariff policies, as well as comments advocating lower interest rates.

The US Dollar Index (DXY) added to previous losses, breaking below the key support at 107.00 to reach new five-week lows as market participants adjusted to President Trump’s inconclusive view on tariffs as well as his defence of lower interest rates. The Chicago Fed National Activity Index will kickstart the US docket on January 27, followed by New Home Sales and the Dallas Fed Manufacturing Index. Durable Goods Orders, the FHFA’s House Price Index, the CB Consumer Confidence, and the Richmond Fed Manufacturing Index all come on January 28 prior to the API’s report on US crude oil inventories. On January 29, the FOMC event will take centre stage, seconded by the weekly Mortgage Applications by MBA, the advance Goods Trade Balance figures, and the EIA’s report on US crude oil supplies. The usual weekly Initial Jobless Claims are due on January 30 along with Pending Homes Sales and another estimate of the US Q4 GDP Growth Rate. The publication of US inflation tracked by the PCE will be in the spotlight on January 31, followed by Personal Income/Spending and the Employment Cost index.

EUR/USD extended its recovery from recent cycle lows, trespassing the key 1.0500 barrier to hit five-week tops on Friday. Germany’s IFO Business Climate comes on January 27. The GfK’s Consumer Confidence gauge in Germany is due on January 28, while the ECB’s M3 Money Supply is expected on January 29. The ECB’s interest rate decision will be the salient event on January 30, seconded by the preliminary Q4 GDP Growth Rate in Germany, the EMU’s flash Q4 GDP Growth Rate, Unemployment Rate, Consumer Inflation Expectations and the final print of the Consumer Confidence. Germany’s Retail Sales will be released on January 31, along with the labour market report, the ECB’s SPF, and the advanced Inflation Rate.

GBP/USD managed to reverse three consecutive weeks of losses and rise markedly over the past five days, coming close to the 1.2500 mark and opening the door to extra gains in the short-term horizon. Mortgage Approvals and the BoE’s M4 Money Supply will be published on January 30, ahead of the Nationwide Housing Prices due on January 31.

USD/JPY navigated a choppy range throughout the week, eventually clinching the second week in a row of losses and revisiting the sub-155.00 region. The final Coincident Index and Leading Economic Index are expected on January 27, prior to the release of the BoJ Minutes and the Consumer Confidence gauge on January 29. The weekly Foreign Bond Investment figures are due on January 30, followed by Japan’s Unemplopyment Rate, advanced Industrial Production, Housing Starts, Retail Sales, and Inflation Rate in Tokyo.

Finally, AUD/USD surpassed the 0.6300 hurdle, printing new five-week peaks and extending further its bounce off recent lows near 0.6130. The NAB Business Confidence index comes on January 27, seconded by the quarterly Inflation Rate and the RBA’s Monthly CPI Indicator on January 29. Australia’s Export and Import Prices are due on January 30, while Producer Prices, Housing Credit and Private Sector Credit will all be released on January 31.

Anticipating Economic Perspectives: Voices on the Horizon

• The ECB’s Lagarde speaks on January 27.
• The ECB’s Lagarde and Cipollones are due to speak on January 28.
• The Fed’s Bowman will speak on January 31.

Central Banks: Upcoming Meetings to Shape Monetary Policies

• The MNB will decide on rates on January 28.
• The Riksbank, the BoC, and the Federal Reserve will meet on January 29.
• The SARB meets on January 30.