Week Ahead – US inflation & retail sales and Chinese trade numbers among next week’s highlights
The coming week will feature numerous important releases that definitely have the potential to lead to notable movements in forex markets, though it will lack a release of the magnitude of the US nonfarm payrolls report that hit markets during this past week. Among the highlights in the coming days will be Chinese trade data, eurozone unemployment figures, UK manufacturing output and US inflation and retail sales.
Quiet week in Australia with building approvals and retail sales gathering attention
The only major releases out of Australia will pertain to building approvals and retail sales, both for the month of November. The former is due on Tuesday while figures on retail sales will be made public on Thursday. Approvals to build new homes rose to their highest in eight months in October, beating expectations for a decline and raising hopes for an increase in overall economic activity, while retail sales also stormed past analysts’ projections in October, boosting sentiment in the economy. It remains to be seen whether the positive momentum will be maintained. Both releases have the capacity to spur positioning on the Aussie. New Zealand will not see the release of major data in the coming week.
Producer & consumer price data and trade numbers out of China; Japanese current account figures due
Data on December producer and consumer prices are due out of China on Wednesday. Year-on-year, PPI is expected to stand at 4.8%, its lowest since November 2016. This compares to the 5.8% recorded in November, a then four-month low coming on the back of softer factory activity as a result of the government’s efforts to reduce pollution as part of its goal to shift focus to the quality of growth rather than merely the quantity. CPI is anticipated to come in at 1.9% y/y. It grew by 1.7% in November.
Remaining in China, Friday will see the release of December trade data. In November, both exports and imports blew past expectations, growing by double digits on an annual basis. It would be interesting to see if there is continuity in upbeat data. Lastly, it is increasingly the case that rising debt levels are a topic of discussion in the world’s second-largest economy and December loan data out next week will also be eyed; these though are due between January 10-15, lacking a specific release date. Besides the yuan, the Australian dollar, which is considered a liquid proxy for China’s economy due to the two nations’ strong economic ties, will also be in focus ahead of and in the aftermath of the above releases.
Of most interest out of Japan is expected to be current account numbers for the month of November. Those are scheduled for release on Thursday (Friday morning Japanese time).
Eurozone unemployment figures, business surveys and retail sales on the agenda; UK house prices and manufacturing output
Numerous eurozone business and consumer surveys are scheduled for release on Monday. Those include January’s Sentix index, gauging investors’ sentiment for current conditions and expectations for the coming months, the European Commission’s December business climate and economic sentiment surveys, as well as the final reading on December consumer confidence. Eurozone retail sales figures for the month of November will be made public on the same day, while industrial orders out of Germany, the eurozone’s – and Europe’s – largest economy, will also be released earlier in the day. Beyond these, Germany will see the release of industrial output and trade figures – exports, imports, and trade balance – on Tuesday.
The eurozone’s November unemployment rate is projected to fall by 0.1% relative to October, matching its lowest since January 2009 of 8.7% and pointing to a labor market that continues to improve. A positive surprise could instill further confidence in the eurozone growth story, leading to long euro positions.
Concluding the week in terms of eurozone releases will be Thursday’s data on industrial production for the month of November.
Moving to the UK, it will be a mostly quiet week with data on house prices due on Monday and manufacturing output due on Wednesday gathering most attention. Analysts expect the Halifax house price index to show house prices rising for the sixth straight month in December, albeit at a weaker pace. Manufacturing output expanded for the sixth consecutive month in October – the longest stretch in decades – kindling hopes that the British industry could be in for a strong performance in 2018 despite analysts predicting a slowdown in economic activity. Wednesday’s release on November manufacturing production will shed light on whether factories will continue to defy downbeat forecasts on the UK economy. Forex market participants will place their sterling positions accordingly. Data on industrial output and figures on the goods trade balance will also be released alongside manufacturing output numbers.
US inflation and retail sales in focus; Canadian housing starts due
Friday will see the release of important data out of the US as December inflation figures and retail sales for the same month will be hitting the markets; both releases are due at the same time. Month-on-month, the pace of inflation growth is expected to ease to 0.2% from November’s 0.4% and come in at 2.2% on an annual basis, the same rate as in the previous month. Year-on-year, core CPI is forecast to expand at a slightly faster pace in December after slowing down a bit in November. Although the Federal Reserve’s preferred inflation measure is the core personal consumption expenditures (PCE) price index, next week’s CPI figures still have their significance and they could spur speculation on the outlook for interest rates and thus result in dollar movements.
Turning to retail sales, those are expected to grow at a slower pace in December after expanding by 0.8% in the month that preceded, far outstripping expectations and pointing to a robust economy. Retail sales excluding automobiles are also anticipated to ease in December. Other data out of the US in the coming week will include November figures on consumer credit and JOLTS job openings as well as December PPI numbers.
Of most importance out of Canada will be December’s housing starts. Those are scheduled for release on Tuesday. November’s building permits are also due out of Canada next week (Wednesday).
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