The Flash February PMIs will take center stage this week and will provide the possible impact of the coronavirus on the global economy. As the current coronavirus outbreak continues to take financial markets’ attention, this week has a wide-range of releases to extend overarching economic activity in recent months. 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.
17 February, 2020 | AtoZ Markets – Flash February PMIs in the United Kingdom, Eurozone, Japan, and the United States will reveal how global have been affected by the recent incident in China. Moreover, investors will see the Australian employment data and UK retail sales data. However, in Japan, fourth-quarter GDP numbers may renew pressure on policymakers to take additional stimulus measures.
Forex Weekly Outlook – Flash February PMIs Eyed
The US retail sales have increased for a fourth straight month in January. Moreover, fundamentals are still solid to indicate healthy consumer spending gains in the coming months. Overall, the U.S. economy remains on its expansion path that may indicate the real GDP to increase 2.0% this year.
On the other hand, any softer news of coronavirus may lead investors back in normal activities. We predict the impact of coronavirus after monitoring the Flash February PMIs.
The EURUSD pair may accelerate its declines if this week’s figures do not provide any indication of eurozone’s economic rebound. Currently, the EURUSD tumbled to a 33-month low on the back of weaker than expected industrial output numbers.
The European calendar will start the week with flash PMI readings by IHS Markit. Currently, there are some doubts regarding the economic rebound in the Euro area. As we know, the Eurozone manufacturing PMI has been recovering since October. Moreover, the pick-up has run smoothly in January but the recent in both the manufacturing and services sectors shows some weaknesses.
On Friday, the final inflation print of January will be released. On the other hand, the German ZEW economic sentiment will be watched out on Tuesday. Both data are important. Last but not least, the European Central Bank’s meeting minutes for January may take some attention on Thursday.
On the USD side, it will be somehow a muted week with most of the second tiered releases. Monday will remain closed in the USA for President’s Day. The first release will make the rounds on Tuesday. Housing numbers may dominate on Wednesday with building permits for January along with the latest producer price index.
Despite the weaker than expected US economic data, the EURUSD pair is likely to remain under the downside pressure after a certain correction.
Over in the UK, flash PMIs will be crucial to create a fresh headache for British businesses. Before the PMI release, some other string of data will shed light on how the UK economy is performing.
Jobs figures will come up first on Tuesday. Currently, investors are looking to see a similar momentum in the employment growth after last month’s surprise jump. Although the strong employment data in December, investors will monitor Wage’s growth closely to give the recent weakness in consumer spending.
On Wednesday, January inflation numbers will take attention before the latest retail sales data on Thursday. Currently, Retail sales have not grown since July of 2019 as households turned more cautious due to the Brexit turmoil. Moreover, a bounce in retail sales in January may suggest that the recent election is restoring confidence among consumers.
However, it would decrease the chance of a rate cut this year. Sterling already got some boost last week on speculation of the unexpected resignation of the UK’s finance minister, which helped cable to recover from 2½-month lows.
On the USD side, on Thursday, the Philly Fed manufacturing index will indicate a glimpse of the manufacturing sector in February. Moreover, on Friday, the flash PMIs and existing home sales indicate further about the US economy.
Overall, the GBPUSD outlook is expected to remain bullish if the UK’s economic release support as there is less economic events in the US.
Australia’s labor market will expose the economic condition of Australia over the next week as quarterly wage growth figures will be released on Wednesday while the employment report is out on Thursday.
Currently, the RBA is looking forward to making deeper cuts to the interest rate; the labor market may indicate a questionable economic optimism.
The devastating bushfire indicates that the Australian economy is going through some difficulties. Moreover, the recent impact of coronavirus is also keeping the Australian economy under pressure. Currently, the Australian Dollar has rebounded from the 11 years low, which indicates that the economy is somehow rebounding. However, any negative news regarding coronavirus may push the price more down, as the overall outlook is bearish.
Moreover, investors will keep an eye on manufacturing and service PMIs that will be released on Friday. Overall the AUDUSD is in a critical zone with the higher possibility to continue the current bearish trend.
Despite a year-long weakness in exports, Japan showed positive growth for the first three quarters of 2019. However, the growth may halt in the final quarter due to the October sales tax rate, trade war, and the latest coronavirus.
The GDP report for Japan will be released on Monday and may show a decrease of 0.9% on a quarterly basis and 3.7% on an annual basis.
Revised industrial production figures for December are also going to be published on Monday. Later on, investors will see the December machinery orders and export numbers on Wednesday. Moreover, on Friday, the consumer price index for January and the Jibun flash manufacturing PMI for February are also going to be released.
It is possible to rebound in the export in January, suggesting that there was an upswing in the global manufacturing activity at the start of the year. Therefore, the manufacturing report will show further about the economy in February.
Overall, the USDJPY may find a direction this week, depending on the releases. However, the current global condition may encourage investors to consider the Japanese Yen as a safe- haven asset.
Gold moved higher on Friday due to the negative news of coronavirus cases. Therefore, investors were encouraged to invest in safe-haven assets in the capital markets. Besides, the Gold, US Bonds also rallied weighing in US yields. However, in the last week, US retail sales have come out in line with expectations, where the December sales were lower.
Gold markets have initially pulled during the last week but got enough support to turn around and show signs of strength. The $1600 level is the primary target of the current bull market. If the market can break above the $1600 level with a daily close, then there is a higher possibility of the Gold to move much higher. Moreover, there are several institutional buy orders behind the bullish momentum of Gold that can make the movement solid. On the other hand, the central banks around the world are keeping to show losing monetary policy that helps to boost the precious metal.
U.S. West Texas Intermediate crude oil moved higher on Friday, putting it in a position to post a weekly gain since early January. Market sentiment improved during the last week after a massive sell-off as investors bet on OPEC+ increasing their production cuts.
The current market structure is extremely bearish, and it requires at least a bounce. The effect of the coronavirus in China may not worsen than now. If the Chinese are getting ready to go back to work, oil prices will explode due to the increase in demand. Therefore, it should move the market higher despite a certain amount of concern regarding the oversupply. Therefore, the price may show some corrective bullish structure in the coming days.
However, if the price breaks below the last couple of weeks, the negative impact may push the price towards the $45 level.
Overall, there is a possibility of reducing the effect of coronavirus in the financial market. If the effect goes completely, the market may find a solid trending movement.