Forex Weekly Outlook December 12-16

The dollar soared, in particular against the euro and the yen, as the Fed introduced its hawkish hike. A rate decision from Japan, GDP data from New Zealand, Canada and the US, as well as durable goods orders, stand out in the week leading to Christmas. These are the main events on forex calendar. Here is an outlook on the main highlights for this week.

Last week the Federal Reserve raised its benchmark interest rate. Saying the American economy is expanding at a healthy pace. The big surprise came from an unprecedented upgrade of the path for further rate hikes in 2017, a move that boosted the dollar. A 14-year high against the euro and a surge of USD/JPY to above 118 stood out despite Yellen downplaying this shift in the dot-plot. Will the greenback continue rising? Let’s start,

 

1. German Ifo Business Climate: Monday, 9:00.  German business climate remained nearly unchanged in November at 110.4, suggesting company owners were not affected by Donald Trump's victory in the U.S. Current business conditions improved but the six-month business outlook was somewhat less upbeat. Sentiment among the manufacturers deteriorated amid mild export forecast. Economists expect both the Brexit vote and Trump’s election will take their toll on the economy at a later stage. German business German business sentiment is expected to climb to 110.7 this month.
2. Japan rate decision: Tuesday. The Bank of Japan maintained its monetary policy on its November meeting, despite postponing again its inflation target deadline. The BoJ noted it will keep policy unchanged unless a drastic occurrence threatens to derail a fragile economic recovery. The central Bank also warned of fresh downside risks and that price momentum was weakening. Governor Haruhiko Kuroda said the combat against deflation takes longer than initially planned; however, the bank expects to reach its inflation target only at 2018.

 

US Crude Oil Inventories: Wednesday, 15:30. U.S. crude inventories declined 2.6 million barrels in the week ended Dec. 9. The reading exceeded a decline of 1.4 million barrels forecasted by analysts. However, economists claim the reading has no bearing on the true state of the inventories since most declines were in PADD 5, predominated by the West Coast while Gulf Coast imports actually ticked higher.

New Zealand GDP: Wednesday, 21:45. New Zealand's economy grew 0.9% in the second quarter, slightly less than forecasted. Exports and domestic demand continued to shine. Exports increased by a solid 4% and household demand rose 3.6%. Analysts expected 1.1% growth on the quarter and 3.7% on the year. The positive figures suggest the Reserve Bank of New Zealand will not cut rates anytime soon. New Zealand's growth rate for the third quarter is estimated at 0.8%.

US Durable Goods Orders: Thursday, 13:30. Orders for long-lasting products edged up 4.8% in October mainly due to stronger demand for commercial aircraft. The reading exceeded forecast for a 3.3% rise. However, excluding the aircraft and auto industries, orders for durable goods increased 1% in October, which is also a solid gain. The positive figures suggest that manufacturing is slowly regaining its footing. Economists expect core orders to climb 0.2% this time.

US GDP data: Thursday, 13:30. The final GDP reading for the second quarter surprised analysts showing 1.4% growth rate following a previous estimate of 1.1% expansion. Exports outweighed imports and business investments increased, providing a more hopeful sign for the economic outlook. Consumer spending edged up 4.3% annual rate. But companies continued to reduce inventories decreasing stocks by $50.2 billion and subtracting from GDP growth. US third quarter GDP is estimated to reach 3.3%.

US Unemployment claims: Thursday, 13:30. The number of new claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 254,000 for the week ended Dec. 10. It was the 93rd straight week that claims were below 300,000, indicating a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller. The four-week moving average of claims rose 5,250 to 257,750 last week. New jobless claims are expected to reach 255,000 this week.

Canadian GDP data: Friday, 13:30. GDP in September showed a 0.3% gain after rising 0.2% in August. The Canadian economy rebounded in the third quarter, growing at 3.5% annually after a rise in energy exports. On a quarterly base, three months to September registered 0.9% gain after a 0.3% decline in the previous quarter. The Bank of Canada expects the economy grow at an overall rate of 1.1% in 2016, followed by 2% in 2017. Canadian GDP is expected to gain 0.1% in September.

That's it for the major events this week. Stay tuned for coverage on specific currencies

 

*All times are GMT.