Free Market Analysis

Hello, to our lovely followers, this is Hugh Meghrazi and today in our weekly Forex podcast series we are going to review the important economic events of the coming week but before that let’s have a quick review of what happened in the last week. The most important statistic that we were waiting for was the US PPI statistics, which was published on Friday, and despite the forecasts this has grown again. Well, it shows US probably hasn't passed the inflation peak yet. As you know PPI has a high correlation with Consumer inflation and if inflation continues in the US, then the Federal Reserve will continue its strict contractionary policies. Considering what happened on Friday and the PPI increased, the dollar index strengthened, however we saw different reactions in the forex market in different currency pairs against US dollar. First USD had grown but in some pairs like NZDUSD, that growth was partially disappeared and the week ended like that. Now let’s talk about the coming week as it’s a very influential week. Let's start from Monday, December the 12th, the first working day of the week. On this day, we have Japan's annual PPI, which is almost expected to be 8.8%, a decrease from 9.1% last month, and we have to see how the statistics are going to be published this month. On the same day, we have the British GDP statistics, which forecasts have reached from -0.6% last month to +0.4% this month, which shows the growing trend of the economy in the UK, and it is expected that the GDP situation will improve. One of the reasons for this improvement could be the drop in gas and energy prices in the UK. We will also have the trade balance statistics for Britain and other statistics such as manufacturing statistics etc. Although the most important one among them is GDP, but other statistics can give us a broader view of the British economy. If all these statistics will be in favour of the UK economy, then it can help to strengthen the pound. On the other story on this day, another important piece of news will be published which is about Canadian dollar. We will have the speech of the members of the central bank of Canada, whose tone is important. Canada, like other countries, from the beginning of the fight against inflation has increased its interest rate but we should see if there is any sign of change in their monetary policy. Now let’s go to Tuesday, December the 13th, the most important day of the week. We will have the final CPI for Germany, and then in the UK unemployment rate, number of people who claimed for unemployment benefit, and the speech of the governor of the central bank for the UK, Mr.Bailey. These are very important for the pound. After these we arrive to one of the most important news of the week, US monthly CPI, annual CPI, and annual Core CPI statistics will be announced. For monthly CPI, forecasts show a decrease from 0.4% to 0.3%, and if it comes true, it will weaken the dollar. In fact, the reduction of CPI relaxes the Federal Reserve and prevents it from implementing severe contractionary policies. On the other side, if the CPI grows like PPI, it creates a bullish movement for US dollar. So, take these announcements into account, on 13th of December we will expect high fluctuations in the GBP and the US dollar. Then on Wed, December the 14th, we will have the annual CPI and Core CPI of the United Kingdom, and then in the US annual interest rate will be announced that the forecasts are half a percent increase, from 4% to 4.5%. After that we see FOMC meeting to determine the monetary policies of the Fed. You know the CPI statistics of the previous day can be very effective on this meeting. So now let's go to the 15th of December, which has a lot of announcements about whether the central banks around the world are changing their rates. In the beginning of this day for New Zealand, we have the GDP statistics, which was 1.7% before, and expected to reach to only 0.9% this month which can be a sign of economic difficulty in New Zealand. If this announcement comes better than expected, it might cause to strengthen the New Zealand dollar. We also have the employment change and the unemployment rate announcement in Australia. After that we should listen to interest rate announcement for Switzerland and their Central bank meeting which can affect the Swiss Frank. The predictions are half a percent increase in the annual interest rate to bring it from half a percent to 1%. In general, in the context of the policies they do not like to take the risk of economic stagnation, and that’s why much later than other countries they have started to increase their interest rate and it doesn't seem like they will continue to increase interest rates severely. Their inflation also is not as high as the US and that helps them to have a more smoother policy. Anyway, we should listen to the speeches to see how much interest rate increases will be, and then decide on the Swiss franc trade. On the same day after the Swiss franc meeting, we will have the interest rate announcement meeting for the UK. As you can see, it is really one of the weeks that is full of important announcements. For Britain, the interest rate was three percent before, and now it forecasted to reach three and a half percent. For both Switzerland and Britain, in addition to the interest rates figures, we must also consider the tone they will use in their speeches. Then, the European interest rate is also going to be announced and we will understand the monetary policies of Europe as well. So the 15th of December is also an important day for Euro. Next, for the US, the retail sale statistics and the manufacturing index will be announced, and these will be very critical as it will impact the policies that the Federal Reserve will adopt. Finally, on the last working day of the week, December the 16th, UK retailers' statistics and then France's, Germany's, and UK's PMI statistics will be published in both the production and service sectors. Forecasts were mostly below 50, for France it was 49.1, for Germany 46.6, and for Britain 46.5. As we know, the higher the numbers are, the better situation for the country's economy. As a result, in terms of PMI statistics, it will be an important day for the Euro and pound. The last news of the week will be the US PMI and the European trade balance, although these days the trade balance is not as important as the PMI. So, at the end, once again I should say it will be a very important week, full of important news and as a result a very volatile week. So, make sure to stick to your risk management policies and Stop losses. This was from this week's podcast; I hope it was useful for you. Please follow us to stay tuned. Have a great day and bye for now.