Week Ahead: Markets Await Jerome Powell’s First Statement. Last week, the focus among investors was the dollar which continued strengthening. The dollar index rose by 1.46%. It is currently trading at $89.90.
This week, traders may continue to focus on the dollar especially from a Federal Reserve standpoint. On Wednesday, the new Fed chair, Jerome Powell, will have his first testimony. The text for his statement will be released one hour before his speech. During the testimony, traders will wait for directions on how he sees the economy and how he plans to move ahead. Traders will wait to hear his language and make the appropriate conclusions.
On Friday, we will receive the employment data from the U.S. Traders expect NFP of 180K and unemployment rate to remain unchanged at 4.1%. Their biggest focus will however be on wage growth, number of hours, and participation rate.
Another major news from the US will be the GDP data, expected to be released on Wednesday. Traders expect the data to show that the GDP grew by 2.4%, slightly lower than last month’s 2.5%. Other major data from the United States will be New Home Sales (expected 655K), Core Durable Goods Orders (expected growth of 0.4%), and consumer confidence (126.3).
Traders will also focus on Mario Draghi, the ECB president. On Monday, Draghi will have a press conference. In the conference, traders will listen to his statements on the Eurozone’s economy and the plans for the stimulus package. The statement will come a few days before the EU releases the inflation data. Traders expect the inflation to grow at an annualized rate of 1.2% down from last month’s 1.3%. They expect core CPI to grow by 1.0%.
This will also be an important week for China, which ends the week long New Year celebrations. On Thursday, the country will release the Manufacturing PMI. Traders expect the data to show a PMI of 51.4. The following day, we will get the important Caixing Manufacturing PMI. An expanding Chinese manufacturing is considered being bullish for the global economy.
In the same week, other countries like Germany, US, Japan, Switzerland, and the UK will release their manufacturing numbers. In the UK, traders expect the PMI to ease slightly to 55.0 from last month’s 55.3. Germany’s PMI is expected to remain unchanged at 60.3 while that of US is expected to ease to 59.0 from last month’s 59.1.
Another significant data expected this week will be Canada’s GDP numbers. As you recall, on Friday, Canada released inflation numbers that beat forecasts leading to a slightly stronger dollar. In the past months, the loonie has fallen significantly against the dollar. Therefore, an economy that is doing significantly well will increase the chances of a rate hike later this year. Traders expect the Canadian economy to grow at an annualized rate of 2%, slightly above last quarter’s 1.7%.
Traders will also focus on the oil market. Last week, data from EIA showed that US crude inventories continued to slow down while the daily production remained unchanged at 10.3M barrels. This pushed the crude oil to end the week higher. Brent was up by 3.49% while the WTI was up by 3.06%. Reduced inventories could lead crude significantly higher.