In the United States, the FED is expected to keep the rate unchanged this week. In the UK, however, will the BOE cut interest rates in January? What other important events and releases will affect the market this week? Get more insights for the new trading week with AtoZ Markets’ Forex Weekly Fundamental Forecast.
January 25, 2020, | AtoZ Markets – The weekly Fundamental outlook contains plenty of top-tier data and crucial central bank meetings with the settlement of their agenda. The Federal Reserve will have its first policy meeting of 2020 this week. Moreover, PCE inflation numbers are likely to be more helpful for investors to determine the further growth of the US economy.
What more can we expect this week? Let’s now have a closer look at the AtoZ Markets’ forex weekly fundamental forecast.
Forex Weekly Fundamental Outlook – UK interest rate cut looms
The Bank of England will hold its January rate meeting on Thursday, 12:00 GMT. This event is expected to be the most exciting one for investors. Currently, investors are widely anticipating that the BOE may cut interest rates. If this happens, we may see an impulsive bearish pressure in GBPUSD and GBPJPY along with other GBP related pairs.
Moreover, inflation numbers from Australia and Eurozone Flash GDP may settle the further tone of Aussie and the Euro. In the meantime, the world will keep an eye on the deadly coronavirus as it is becoming worse day by day.
The Bank of England will announce its policy decision on ‘Super Thursday’. In the meeting, the Bank of England will also publish its monetary policy report along with a press conference. Therefore, politicians will enjoy some calm regarding Boris Johnson’s Withdrawal Agreement through the Parliament when the economy is stagnating from the Brexit turmoil.
The UK is preparing to exit the European Union on January 31, though in practice, therefore, keeping no longer holding a seat at the EU’s decision-making table. The transition period will kick in at 23:00 GMT on January 31.
However, the common query for this week is- will the BoE cut interest rates this month? Investors will have to wait and see whether BoE policymakers are to cut interest rates or not. Expectations of an interest rate were increased earlier this month when Governor Mark Carney along with the other two members flagged lower rates. Their dovish tones were influenced by weaker economic data for November and December 2019. However, the recent data are not encouraging and the chance is 50% to cut the interest rate this week.
The GBPUSD pair is expected to be volatile as its initial reaction of the rate cut. However, investors will see the Bank’s predicted path for the coming period in response to future easing. Therefore, any sell-off could be temporary if policymakers are not overly dovish about the outlook.
GBPUSD is one of the most traded currency pairs which is expected to be volatile due to the decisions from both BoE and FED. In addition to that, the US will release the advance GDP estimate this week. As we know, the US economy is expected to grow by an annualized rate of 2.1% in Q4. Therefore, any positive US data will bring GBPUSD sellers to take action.
Eurozone will release the Preliminary fourth-quarter GDP numbers on Friday. However, ahead of that, January business surveys will be the main focus of investors.
The week will start with Germany’s IFO Business Climate Index on Monday and the European Commission’s economic sentiment indicator on Thursday. Both of the reports may show an increase for January, following the positive IHS Markit PMIs.
Moving to Friday’s data, the focus will be on how the Eurozone economy has performed in the last quarter of 2019. The projected GDP for Q4 has expanded by 0.2% quarter-on-quarter, slowing from the prior 0.3% rate. Any confirmation will indicate that the growth in Eurozone is stabilizing and that a rebound may occur in the coming days.
The flash CPI report is expected to support the overall European economic rebound. The headline inflation rate is expected to rise from 1.3% to 1.4% on a yearly basis in January. On the other hand, the core rate is expected to tick down slightly to 1.3% y/y.
Overall, the Euro is expected to accelerate the decline if the GDP print disappoints. Otherwise, the economic rebound may create bullish momentum in EURUSD price.
The US will release a bunch of data this week to put a solid movement in EURUSD. Moreover, investors will get to hear from the FED at its two-day monetary policy meeting on Wednesday. The week will start with the home sales on Monday, durable goods orders will follow on Tuesday. Additionally, investors will see the pending home sales on Wednesday with the personal income and outlay reports on Friday.
The combination of US and European data will indicate the further aspect of EURUSD price this week. Currently, the focus is to monitor how the European economy is rebounding.
On Friday, Japan will release the Industrial output, retail sales, and unemployment figures. These reports are important as investors are keen to see the rebound of the economy following the October sales tax hike and the slump in exports. If the retail sales readings and preliminary industrial output for December fail to turn positive, it would create divergence with the Bank of Japan’s hawkish tone to its growth forecasts.
Moreover, BoJ will indicate further about its last policy decision when it will publish a summary of the January meeting on Wednesday.
As far as the Yen is concerned, the main driver for this week will be how well it holds the risk appetite sentiment amid a possible pandemic from the coronavirus that already took more than 40 people’s life in China.
The February rate cut of Australia continues to see as a better-than-forecast data have seen investors flip-flopping between a reduction and no change.
The latest expectation is that the Reserve Bank of Australia will hold the rate cut in February 4 meeting. Despite the bushfire, the December employment numbers pointed a limited downward perspective for the Australian economy.
If this week’s consumer price index (CPI) reports for Q4 shows an impressive figure, the odds for monetary policy easing in February are likely to hold further.
Besides the CPI figures on Wednesday, producer price index (PPI) along with the private sector credit numbers for December will be released on Friday. Additionally, the NAB business conditions survey for December may attract investors’ attention on Tuesday.
The AUDUSD will be lower if the Australian price indicators disappoint. The Chinese official manufacturing PMI will also sway the Australian economy on Friday. It will provide investors with a first glimpse of how the Chinese economy has performed in the first month of 2020.
Gold Price Forecast
The ‘Phase One’ deal is done and tensions in the Middle East are getting settled. Therefore, we can expect that investors’ focus will shift to Central Bank’s decision in their policy meeting. The US economy faced a negative impact on the trade war in 2019. Therefore, the manufacturing PMI numbers fell to the lowest since June 2009. Moreover, Eurozone, UK, and Japan also had subdued growth in the past few years.
The growth of these major economies will reflect in risk-on or risk-off sentiment in the Gold price. Despite the releases, the price of Gold may consolidate throughout the week.
In the Forex Weekly Fundamental Forecast, any hiccups related to economic growth, employment or trade could start to reflect on Gold prices. As Central Banks may continue the dovish stance, gold buying may pick up in ETF buying and CFTC positions.
Oil Price Forecast
Over the last few months, the position of hedge funds in the oil market has become heavily stacked. The expectation of higher prices made the buy positions 7 times higher than the sell positions. However, the past price action shows that this kind of positioning may enforce significant declines in Oil prices.
Moreover, the car industry took the threat of new electric car models than ever before this year. Therefore, Tesla’s results on Wednesday will indicate a good proxy for the US appetite for electric cars. Currently, the company is expecting to report a dip in revenues during 2019.
In addition to that, US Q4 GDP data will be much less of a guessing game. Therefore, it will reflect on the country’s overall oil demand. On the other hand, European Oil consumption has closely connected to the Eurozone’s GDP growth over the last few years that is about to rebound.
Overall, in the Forex Weekly Fundamental Forecast, we may see a bearish momentum in the Oil market if Central Banks’ decision does not support the Oil price.
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