Weekly Outlook: 2017, January 08 - January 15

Weekly Outlook: 2017, January 08 - January 15

The US dollar wobbled in the wake of 2017, torn between good and bad news. US Retail sales, consumer sentiment and PPI stand out. These are the highlights for this week.

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The US monthly employment report showed a lower than expected job growth in December but wages registered a 2.9% annualized gain. The economy added 156,000 positions while expected to increase 175,000. The unemployment rate edged to 4.7% from 4.6%. However, wage growth was the most significant factor in December’s report as average hourly wages jumped 10 cents to $26, the highest gain since 2009, indicating the US labor market has fully recovered. The final report of 2016 also comes amidst a presidential transition period. Donald Trump has promised aggressive fiscal measures including tax cuts and higher domestic spending to boost economic growth beyond the mild expansion witnessed so far.

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1. US Crude Oil Inventories: Wednesday, 15:30. Oil prices increased as Saudi Arabia consented to OPEC’s plea to reduce output after prices fell on Us data.
2. US Unemployment Claims: Thursday, 13:30. The four-week moving average of claims declined 5,750 reaching 256,750. The number of weekly unemployment claims have remained below the 300,000 threshold associated with a healthy labor market, for 96 consecutive weeks. Economists expected a higher reading of 262,000.
3. US Retail sales: Friday, 13:30. Consumer spending strengthened recently amid continued solid job gains as well as rising wages, raising consumer’s optimism about their finances. Meanwhile, core sales, excluding automobiles and service stations increased 0.2%, while anticipated to rise 0.4%.
4. US PPI: Friday, 13:30. Producer prices have rebounded from last year’s plunge in oil prices and are expected to offset deflationary effects from the dollar’s renewed strength.
5. US UoM Consumer Sentiment: Friday, 15:00. Consumers expressed high hopes from the new economic policies planned by the newly elected president.

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Weekly EUR/USD Outlook: 2017, January 08 - January 15

EUR/USD slipped to new 14-year lows in the wake of 2017 but recovered very quickly thanks to weakness in the USD. The second week of January features trade balance and industrial output measures.

Data in the euro-zone has been relatively positive, with a significant drop in German unemployment and a rise in inflation, especially in Germany. Retail sales missed expectations, but this did not stop the euro. In the US, data had a good start with an excellent report from the manufacturing sector but then became sour with ADP. The meeting minutes from the Fed hurt most, as they showed that Yellen and co. got a bit ahead of themselves with expectations for stimulus from Trump. The last word went to the dollar, with the NFP report: wages are up 2.9%, triggering talk about inflationary pressures.

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1. German Industrial Production: Monday, 7:00. Germany is considered the locomotive of the continent. In October, output rose by 0.3%, bouncing after a slide seen beforehand. A rise of 0.7% is on the cards.
2. German Trade Balance: Monday, 7:00. German enjoys wide trade surpluses. Back in October, this stood at 20.5 billion euros. Germany’s exports keep the euro bid. A similar level of 20.8 billion is estimated for November.
3. Sentix Investor Confidence: Monday, 9:30. This 2800-strong survey disappointed in December with a slide back to 10 points, ending four consecutive advances and surprises. A bounce to 12.6 is projected.
4. Unemployment Rate: Monday, 10:00. The euro-zone unemployment rate resumed its falls back in October with a drop to 9.8%. This was quite encouraging after the rate got stuck in double-digit measures for a long time. A repeat of 9.8% is forecast.
5. French Industrial Production: Tuesday, 7:45. The second-largest economy in the eurozone saw a squeeze in its output back in October, a drop of 0.2%. Changes here are less volatile than in Germany. An increase of 0.5% is predicted.
6. French Final CPI: Thursday, 7:45. Contrary to Spain and Germany, France’s inflation figure for December missed expectations with 0.3%. This number will likely be confirmed in this final read.
7. Industrial Production: Thursday, 10:00. Despite being released after the German and French figures, the read for the whole continent is of note. A drop of 0.1% was reported in October. A gain of 0.5% is on the cards.
8. ECB Meeting Minutes: Thursday, 12:30. The European Central Bank announced an extension of its QE program through 2017, a removal of some limits on bond buying but also a reduction in the pace of these buys. The bottom line was dovish as seen in the value of EUR/USD The meeting minutes could reveal if the ECB is still very worried about inflation, the reason for extending the program, or actually satisfied with the progress that has been made, the reason for the reduction. It could also tell us something about the next potential moves.

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