In the final trading week of what could be termed as one of the most volatile months in the Forex market, the US Dollar witnessed some mixed performance against other major currencies. The US Dollar continued with its strong up-move against commodity currencies, namely - AUD, NZD and CAD and extended its recovery against CHF. The greenback, however, lost some weight against EUR, GBP and JPY on the back of weaker-than-expected fourth-quarter GDP and durable goods orders data. The US Dollar mixed performance led to some minor losses for the overall US Dollar Index (I.USDX). Nevertheless, the US Dollar still ended the month on a strong note, marking its seventh consecutive month of gains.
Going forward investors will remain engaged with a series of top-tier economic events scheduled at the beginning of a new month and would continue fueling volatility in the Forex market. This week key highlights includes one of the most keenly watched economic indicator from the US, monthly jobs report, popularly known as Non-Farm payrolls data (NFP) and important PMI figures for the month of January along-with monetary policy decision announcements from Australia and UK. Here is a brief overview on some of the important market-moving events scheduled during the course of the upcoming week.
For complete list of the economic events, refer to Forex Calendar
US Economic Releases
This week's US economic calendar begin with the release of ISM manufacturing PMI data for the month of January. Following a larger than expected drop in December, the index, scheduled for release on Monday, is expected to drop further and come-in at 54.9, from 55.5 recorded in December. The ISM non-manufacturing PMI data, scheduled for release on Wednesday, is expected to show a minor improvement and reach 56.6, from 56.2 recorded in the previous month.
Meanwhile, in the run-up to the NFP release, ADP report, which shows the number of private-sector jobs addition and provides an early estimate for the government's report, is scheduled for release on Wednesday. The ADP report is expected to show an addition of 221,000 new private-sector jobs in January, down from 241,000 jobs added in the previous month.
Although, other economic releases could possibly provide some short-term clues for the markets, but investors attention would still remain focused on NFP, which is scheduled for release on Friday. The US labor market reports is known for fueling volatility in the financial markets and this week's release would be no exception. Following a big surge in the number of new job additions in November and better-than-expected print in December economists remain optimistic over the pace of recovery in the US labor market. The consensus estimate the report to show an addition of 231,000 new jobs to the economy in January and the unemployment rate is also expected to hold steady at 5.6%.
Following last week's disappointing US GDP growth number for the fourth-quarter of 2014, a further disappointment on the data front from this week's economic releases might trigger some near-term corrective move for the US Dollar. Even if the economic releases come in-line with market expectations, it would undo any uncertainty over the strength of the broader US economic recovery, eventually helping US Dollar to build-up on it recent gains.
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Apart from the US releases, economic releases and monetary policy decision announcements from Australia and UK might provide some momentum for the market. Key economic releases to watch from this week's UK economic calendar includes PMI readings, construction and services PMI for the month of January. Construction PMI data is scheduled for release on Tuesday and release of services PMI is scheduled on Wednesday. On Thursday the Bank of England is scheduled to announce its monetary policy decisions, where market players are not expecting any major change in the central bank's current monetary policy stance. Hence this week's BoE monetary policy announcement is unlikely to have any significant impact on GBP pairs.
The Reserve Bank of Australia (RBA) is also scheduled to announce its monetary policy decision on Tuesday. Following surprise rate-cut by SNB and BoC and hint towards a possible rate cut by RBNZ has now raised expectations that RBA might also follow suite and possibly surprise the market. Although the consensus are not foreseeing a rate cut from this week's meeting, but a dovish economic outlook in RBA's Monetary Policy Statement, which is scheduled for release on Friday, might be considered as a hint towards a possible rate cut by the central bank in the near-future. This would seriously deteriorate near-term demand for the already slumped Australian Dollar (AUD). Other economic indicators that could this week an eventful week for AUD includes Australian trade balance and retail sales data, scheduled for release on Tuesday and Thursday respectively.
Summing it up, this week's important economic releases/events has all the ingredients to trigger some meaningful volatility and make the upcoming week yet another eventful week in the Forex market.
Senior Market Analyst
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