Central banks' rate decision, Inflation report and more


18 January, AtoZForex.com, Lagos – China worries deepen as the country may have now entered a bear market. The China market rout has led to an aggregate of a 20% fall from peak levels, therefore entering a so-called China bear market.

Crude oil has also continued south, presently trading around $29 per barrel, as crude prices fell below $30 for the first time in about 12 years. Continuing the stubbornly high global oil production despite a roughly 70 percent dip in crude prices since mid-2014, the crude oil inventories report, showed a rise of 234,000 barrels in the previous week. The Canadian dollar continues to feel the brunt of the falling oil prices as the currency currently trades around a 13 year low against the USD

We expect a low volatility day entering a new week, as US banks remain closed in observation of the Martin Luther King day. However, the rest of the week promises to be interesting as the economic calendar is packed with key fundamental releases from various major economies.

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More China data, more worries

Considering that China data has been a key driver of the global economy lately, more economic reports from the country could equal more worries. On Tuesday, the Gross Domestic Product (GDP) is due for release, along with the country’s industrial production data. Already, Premier Li Keqiang said on Saturday that China growth totaled more than $10 trillion in 2015 and the economy grew by around 7 percent, with the services sector accounting for half of GDP. Speaking on the job situation, he said employment had grown more than expected with 900 million people making up the country's total workforce, including 150 million skilled professionals. However, China's 2015 GDP growth is forecast for a more tepid growth to 6.9 percent, down from 7.3 percent in 2014 and the slowest pace in a quarter of a century.

UK inflation, unemployment and consumer spending report

Last week, the Bank of England maintained interest rate at around seven year lows at 0.5% and that doesn’t look set to change any time soon. The central bank has shown concern over the slump in oil, worries about China, mounting risks from the U.K.’s European Union referendum and the World Bank cut in growth forecasts. The inflation report to be released on Tuesday is forecast to remain at 0.1%, putting is well below the BoE’s 2 percent target. And with the plunging oil prices, this is unlikely to pick up anytime soon. On Wednesday, we have the UK wage report and unemployment claims data. The average earnings index 3m/y which measures earnings with bonuses are forecast to slow from 2.4% to 2.1%. While the claimant count change is expected to rise around 4.1K between November and December. While the Unemployment Rate is expected to remain at 5.2%. On Friday, the retail sales m/m which s a primary gauge of consumer spending is expected to show a decline of -0.1%. These releases do not seem likely to support the already falling pound. The pound has declined against all but two of its 16 major peers since Dec. 10 and is at its lowest since 2010 against the dollar.

ECB Press Conference

After the ECB policy decision in December disappointed analysts, the European Central bank is likely to keep the door open for further easing at its policy meeting this week. This is expected to determine the fate of the Euro as the bloc currency has been mixed against its major pairs in recent times. Other news from the Eurozone this week include German ZEW Economic Sentiment on Tuesday, Minimum Bid Rate on Thursday, and the French and German Flash Manufacturing PMI on Friday.

US inflation report

The key fundamental release for the US this week is the inflation report. The CPI is expected to show a second consecutive month of flat inflation at 0.0%. While the Core CPI m/m which excludes food and energy is forecast to come at 0.2%. The Philly Fed Manufacturing Index and unemployment claims due on Thursday will also be closely watched.

Bank of Canada (BOC) Monetary Policy Report

The Canadian dollar has been one of the hardest hit G10 currencies since the oil price plunge commenced, which has had a ripple effect on the rest of the economy. The central bank is now forecast to cut rates for the first time this year from 0.5% to 0.25%, having cut rates just once in 2015. We also have the CPI m/m report due on Friday. As well as the Manufacturing Sales m/m on Wednesday.

In conclusion, it promises to be a highly volatile week with interest rate decisions from various regions, inflation reports and much more.

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