Forex Crunch Forex Weekly Outlook – February 15-19

Posted: 13 Feb 2010 02:00 AM PST

A volatile week full with hope and fear comes to an end with currencies returning to the same spots. The week ahead contains a nice mix of events from all over the world: a rate decision in Japan, employment data from Britain, and lots of American numbers, with important inflation data to close the week. Here’s an outlook for the major events in the week ahead.

The Greek crisis is far from over. While Greece is only a small country at the edge of the Euro-zone, the implications of debt and the ways to deal with it have an impact on many other troubled countries in the region that is on the brink of new recession. This also has a wider impact – debt problems trigger risk aversion trading – dollar buying. OK, let’s start the review:

Japanese GDP: Published on Sunday at 23:50 GMT. As of Q2 of 2009, Japan is out of recession. The growth rate has dropped to 0.3% in Q3, after being first reported at 1.2%. Apart from slow economic growth, Japan historically suffers from deflation, a problem that won’t be solved soon. Growth of 1% is expected now.
British CPI: Published on Tuesday at 9:30 GMT. This important indicator has risen sharply in recent months. The last print was 2.9%, and the upcoming number is predicted to be 3.6%, above the government’s target. Mervyn King dismissed the inflation threats and signaled that no rate hike is underway. Will he continue this stance once again? Rising inflation isn’t seen elsewhere, and it will be interesting to see the impact on the whole market.
ZEW Economic Sentiment: Published on Tuesday at 10:00 GMT. This is a major market mover – especially the release for Germany. In the past months, it has deteriorated sharply, going hand by hand with the Eurozone’s troubles, and Germany’s stagnant economy. It’s expected to dive again – this time from 47.2 to 41.9 points.
American TIC Long-Term Purchases: Published on Tuesday at 14:00 GMT. Foreign investment in the US has made a leap last month, rising from 20 to 126 billion dollars. This confidence in the US economy and the dollar probably won’t repeat itself, at least not so strong – 50 billion is predicted this time. A stronger number will boost the dollar.
British Employment Data: Published on Wednesday at 9:30 GMT. The number of unemployed people made a turnaround in Britain two months ago and the positive trend continued last month as well. The Claimant Count Change, an early an important indicator is expected to show another “positive loss” of unemployed people this month – 14.3K. The British Unemployment Rate is predicted to remain stable at 7.8%, but economists were wrong with this figure over and over again. Positive numbers will also push towards a rate hike.
American Building Permits: Published on Wednesday at 13:30 GMT. The housing secotr was one of the main contributors to the downturn in the economy, and is recovering slowly. The annualized number of 0.65 million is predicted to be followed by a drop to 0.62 million. The economy cannot make a significant advance without a healthy housing sector. Also note the housing starts published at the same time.
FOMC Meeting Minutes: Published on Wednesday at 19:00 GMT. Although the wording of the statement hasn’t changed, there was one surprise in the recent American rate decision – one member voted to change the wording and start signalling a future rate hike. When the minutes will be revealed, we’ll get to see if other members also began thinking out loud about such an option.
Japanese Rate Decision: Published on Thursday, in the early hours. No rate hike is expected in Japan, that suffers from deflation. The Overnight Call Rate is predicted to remain unchanged at 0.1% but the views that that will be expressed about the economy by the BOJ usually move the Yen.
American PPI: Published on Thursday at 13:30 GMT. Producer prices aren’t always a market mover, but this time, a rise of 0.8% is predicted, much higher than last month’s 0.2% rise and much higher than previous months. Such a rise might cause Bernanke to rethink the “extended period” wording in the FOMC Statements.
American Unemployment Claims: Published on Thursday at 13:30 GMT. After a surprise last week – a drop to 440K, the drop in jobs seen in the NFP can be forgotten. A small rise to 445K is predicted this time. Only another drop, preferably below 430K can boost the dollar.
American Philly Fed Manufacturing Index: Published on Thursday at 15:00 GMT. This important gauge has seen 6 months of improving conditions, but last month was disappointing with a drop to 15.2 points. A steady rise to 17.2 is predicted this time.
American CPI: Published on Friday at 13:30 GMT. The major inflation figure closes the week. Contrary to the expectations from the PPI, consumers probably didn’t see a significant rise in prices. CPI is predicted to rise by 0.3% and Core CPI, an indicator that the Federal Reserve watches, is expected to rise by 0.2% – very stable. A jump will make the markets jump, seeing another crazy Friday. For USD/CAD traders, note that the Canadian CPI is published around the same time.

That’s it for the major events this week. I’ll later post specific currency coverages. Have a great weekend!

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Forex Links for the Weekend

Posted: 12 Feb 2010 10:41 AM PST

After a wild week of trading, it’s time to sit back and read some interesting long-term forex-related articles. Here are my favorites from the past week:

Michael Greenberg reports about the hesitant entry of China into the world of forex.
Kathy Lien explains in a short Q&A post what credit default swaps are.
Casey Stubbs lays out the important reverse patterns in forex trading.
Larry Greenberg dives into the impact of snowstorms and GDP, as many regions in the US are covered by snow.
Fransesc Riverola reports that the first week of February was the strongest that FXStreet has ever seen. I’ve also experienced a peak in traffic, but much less than FXStreet
Arnaud Jeulin, owner of Mataf.net opened a personal blog in which he will discuss the forex industry. Good luck!
Jay Norris discusses the movements in gold and silver in troubled times.
James Chen sees a continuation of the steep downtrend Euro/Dollar.
Adam Kritzer wonders if the Greek problems could sink the Euro.