Weekly Outlook: 2016, January 31 - February 07

Week Ahead by Crédit Agricole: NFP, RBA, FX Wars, GBP Squeeze, Sell AUD, NZD Rallies

Attachment 18315

• "The calm maybe deceiving and the bulls maybe heading to a ‘China’ shop. Indeed, potential disappointments from the China PMIs could well halt the risk bounce in its tracks. Apart from the RBA, which may sound extra dovish just to keep AUD from bouncing further, there will not be many central bank speeches to sooth market nerves further."
• "We remain constructive on USD against the background of raging global currency wars that should more than offset the negative impact of the recently more dovish Fed. Next week’s US data calendar could further boost policymakers’ confidence in the near-term outlook of the US economy and even inflation, and help USD."
• "GBP looks oversold to us and more indications that PM Cameron and his EU colleagues are inching closer to a deal could help the currency consolidate. The BoE Inflation report should not trigger another bout of re-pricing of BoE rate hike prospects and, with so many negatives in the price by now, that could leave GBP as a prime candidate for a short squeeze."

Attachment 18316

Attachment 18317

• AUD – 'Next week’s Chinese business activity data should prove the currency’s main driver. We expect rallies to remain a sell.'
• GBP – 'We see limited scope of next week’s BoE announcement and inflation report pushing GBP lower.'
• USD – 'Next week’s payrolls report should prove constructive enough in order to prevent rate expectations and the greenback from falling further.'
• NZD – 'The policy outlook should keep the NZD a sell on rallies.'

the source

Forex Weekly Outlook February 1-5

Attachment 18321

US ISM Manufacturing PMI, rate decision in Australia and the UK, Employment data from New Zealand, Canada and the US, including the all-important NFP release, Mark Carney speaks in London and Trade balance in Canada and the US. These are the main highlights for this week. Here is an outlook on these important events.

1. US ISM Manufacturing PMI: Monday, 15:00. The manufacturing PMI continued its contraction in December after a disappointing reading of 48.6 in the previous month. This was the lowest reading since July 2009 with declines across the board. The New Orders Index increased 0.3 points reaching 49.2. The Production Index registered 49.8% from 49.2% in November. The Employment Index declined 3.2 to 48.1. The manufacturing PMI is expected to remain at 48.6 this time.
2. Australian rate decision: Tuesday, 3:30. The Reserve Bank of Australia maintained the official cash rate at 2.0% on its December meeting. Governor Glenn Stevens noted a certain improvement in economic conditions, but the outlook for may require further monetary easing. Stevens said he is willing to cut rates if economic data worsens.
3. NZ Employment data: Tuesday, 21:44. New Zealand employment market unexpectedly contracted for the first time in three years in the third quarter, mainly due to a decline in part-time workers. Employment fell 0.4% after rising 0.3% in the previous quarter. Economists expected employment to grow 0.4% in the third quarter. Furthermore, the unemployment rate increased to 6% from 5.9 in the second quarter. Economists expect New Zealand’s labor market to expand by 0.8% while the unemp[loyment is predicted to rise to 6.1%.
4. US ADP Non-Farm Employment Change: Wednesday, 13:15. US private sector employment expanded by 257,000 jobs in December according to the ADP report. The reading pointed to underlying strength in the economy and followed a 211,000 gain in the previous month. Labor market strength suggests the economy’s condition remains solid, and may prompt the Federal Reserve to raise interest rates again in March. US private sector is expected to gain 191,000 in January.
5. US ISM Non-Manufacturing PMI: Wednesday, 15:00. US service sector expanded less than expected in December with the slowest growth pace in almost two years. The index declined to 55.3 from 55.9 in November, missing market forecast for a reading of 56.0. The New Orders Index posted 58.2, rising 0.7 points; the Employment Index increased 0.7 points to 55.7, while the Prices Index declined 0.6 points from November. However the majority of respondents’ comments remain positive about business conditions and the overall economy. US service sector activity is expected to decline to 55.2.
6. UK Rate decision: Thursday, 12:00. The Bank of England maintained interest rates in January amid volatility in global markets and a continuous fall in oil prices slowing inflation even further. Only Ian McCafferty voted for a rise to 0.75%. MPC members believed “the outlook remained unchanged from the previous economic forecasts in November. But the minutes also noted the volatility on financial markets, and in share prices in particular. Furthermore, the MPC highlighted a 40% fall in the oil price which would badly affect inflation growth.
7. Mark Carney speaks: Thursday, 12:00. BOE Governor Mark Carney will speak about the Inflation Report, in London. Carney said at a speech in London that the Bank of England should not begin raising interest rates in the coming months, stating the weak condition of the global economy and the slowed growth in the UK. He also said that the MPC will watch for signs of renewed downturn in inflationary pressures before offering another round of monetary easing.
8. US Unemployment Claims: Thursday, 13:30. The number of new US claims for unemployment benefits declined last week from a six-month high of 294,000 to 278,000, reaffirming the strength of the US labor market. Economists forecasted a drop to 282,000 in the latest week. The four-week moving average is now 23,750 above its post-recession low of 259.250 from last October. The number of new claims is expected to be 286,000 this week.
9. Canadian Employment data: Friday, 13:30. The Canadian labor market expanded unexpectedly in December adding 22,800 jobs, amid a large gain in part-time work. The number of full-time employment actually declined in December by 6,400 while the economy added 29,200 part-time jobs. Meanwhile, the unemployment rate remained unchanged at 7.1%. The overall picture is less appealing; indicating hiring in the private sector is weak. The 2015 employment growth rate was slightly stronger than in 2014 and 2013, when the overall number of jobs expanded by just 0.7% in each of those years.
10. US Non-Farm Employment Change and Unemployment rate: Friday, 13:30. U.S. payrolls surged in December by 292,000 following 252,000 in the previous month. Hiring got a boost from unseasonably warm weather and the unemployment rate remained unchanged at a 7-1/2-year low of 5%. The firm employment data indicates the economy sustains growth while the recent weakness could be attributed to the manufacturing and export-oriented sectors. U.S. payrolls for October and November were revised up to show 50,000 more jobs created than previously reported, adding to the report’s upbeat tone. US private sector is expected to expand by 192,000 in January, while the unemployment rate is estimated to remain at 5%.
11. US Trade Balance: Friday, 13:30. US trade deficit contracted in November to a nine-month low of $42.4 billion as a sharp decline in imports outweighed a decline in exports. However, the overall picture shows both exports and imports are now falling due to the dollar’s strength and the weakness in global economy. Exports fell 0.9% to US$182.2 billion, more than a four-year low. US trade deficit is predicted to inch up to $42.8 billion in December.

the source

Have you wondered when interest rates are going to rise? Were you aware that certain interest rates are a good indicator for the economy? If you are an investor, retiree, if you have an adjustable-rate loan, or just want a better understanding of interest rates, this article is especially for you!

Attachment 18340

Interest Rate Basics

Interest rates are one feature of a debt instrument and are issued by governments and corporations who need to raise capital. There are several types of interest rates, each with a different structure, maturity, etc. Here are some of the major types and a brief explanation of each.

• Fed Discount Rate: This is a short-term rate set by the Federal Reserve and is the rate charged to member banks that borrow from the Fed. Banks often base their lending rates on it.

• Fed Funds Rate: The fed funds rate is established by the market, influenced by the Fed, and is the rate of interest charged when banks lend to each other. For example, if Bank A has excess reserves at the Fed, and Bank B is short on its reserve requirement (established by the Fed), Bank B may borrow from Bank A to meet their requirement. These are usually overnight loans.

• Prime Rate: This is set by banks and is the rate banks charge on loans to their most credit-worthy customers.

• U.S. Treasury Bills: These are short-term debt instruments (maturity of 1 year or less) and are issued and backed by the federal government.

• U.S. Treasury Notes: These are intermediate-term debt instruments (maturity of 1 – 10 years) and are issued and backed by the federal government.

• U.S. Treasury Bonds: These are long-term debt instruments (maturity of 10 years or more) and are issued and backed by the federal government.

more...

2016-02-02 13:53 GMT | [NZD - GDT Price Index]

• past data is -1.4%
• forecast data is n/a
• actual data is -7.4% according to the latest press release

if actual > forecast (or previous one) = good for currency (for NZD in our case)

[NZD - GDT Price Index] = Change in the average price of dairy products sold at auction. It's a leading indicator of the nation's trade balance with other countries because rising commodity prices boost export income.

Attachment 18439

==========

NZDUSD M5: 26 pips price movement by GlobalDairyTrade Price Index news event :

Attachment 18440