Forecasting the upcoming week: Inflation is key to the FX market

Agustin Wazne FXStreet

The US Dollar (USD) lacked directional momentum this week amid geopolitical and local uncertainty. On the one hand, the United States (US) President Donald Trump continued threatening Iran with military interventions, taking down the tone by the week’s end, but noting that all options are still on the table. On the other hand, the Federal Reserve (Fed) is facing problems stemming from the lawsuit against Chairman Jerome Powell, keeping the USD unattractive to investors.

USD Index: the US Dollar Index (DXY) ended the week with modest gains and is trading near 99.30, reaching a monthly high.

On the datafront, the US will release next week the ADP Employment Change four-week average, Initial Jobless Claims, and the Personal Consumption Expenditures (PCE) for October and November, the preferred measure of inflation for the Federal Reserve.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.02%	-0.10%	-0.41%	0.11%	0.17%	-0.28%	-0.22%
EUR	0.02%		-0.09%	-0.39%	0.13%	0.19%	-0.25%	-0.20%
GBP	0.10%	0.09%		-0.30%	0.22%	0.28%	-0.17%	-0.11%
JPY	0.41%	0.39%	0.30%		0.55%	0.59%	0.14%	0.20%
CAD	-0.11%	-0.13%	-0.22%	-0.55%		0.04%	-0.41%	-0.34%
AUD	-0.17%	-0.19%	-0.28%	-0.59%	-0.04%		-0.45%	-0.38%
NZD	0.28%	0.25%	0.17%	-0.14%	0.41%	0.45%		0.06%
CHF	0.22%	0.20%	0.11%	-0.20%	0.34%	0.38%	-0.06%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

EUR/USD: The EUR/USD pair is trading near the 1.1620 price zone, losing some ground by the end of the week. The Eurozone Harmonized Index of Consumer Prices (HICP) and Core HICP are scheduled to be published by Monday. German Producer Price Index, along with the ZEW survey, both for Germany and the Eurozone, will be released on Tuesday.

GBP/USD: The GBP/USD pair is trading near 1.3400, seeing significant movement throughout the week but ending on a muted note. The United Kingdom (UK) Producer Price Index (PPI) and core PPI outputs will be released on Tuesday alongside the Retail Price Index.

USD/JPY: USD/JPY is trading near the 158.00 price zone, ending the week with little movement, as investors are wary of the upcoming Bank of Japan (BoJ) monetary policy decision next Friday.

USD/CAD: The USD/CAD pair is trading near the 1.3910 price zone, ending the week on a muted tone as investors await the Bank of Canada (BoC) Consumer Price Index (CPI) and Core CPI to be released on Monday.

Gold: The XAU/USD pair is trading at $4,620, posting an all-time high of $4,643 earlier in the week.

Anticipating economic perspectives: Voices in Davos

Swiss National Bank (SNB) President Martin Schlegel will be opening the World Economic Forum in Davos on Tuesday.
European Central Bank (ECB) President Christine Lagarde will be speaking on Wednesday and Friday.
US President Trump will deliver a speech on Wednesday.
ECB Joachim Nagel will speak on Wednesday.

Central banks: Upcoming meetings/releases to shape monetary policies

China's GDP, Industrial Production, and Retail Sales on Monday.
BoC Consumer Price Index Core and Canadian CPI on Monday.
UK Employment data to be released on Tuesday.
UK CPI to be released alongside the PPI on Wednesday.
Australian Employment data will be released early on Thursday.
US GDP and PCE will be released on Thursday.
NZ CPI will be released on Thursday.
The BoJ's interest rate decision and the Monetary Policy statement will be released on Friday.

(This story was corrected on January 16 at 18:02 GMT to fix the date of the upcoming speeches in the World Economic Forum in Davos and of the macroeconomic reports releases.)

Author

Agustin Wazne

FXStreet

Agustin Wazne joined FXStreet as a Junior News Editor, focusing on Commodities and covering Majors.

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