Coming back from the New Year’s celebrations, investors and traders are likely to find their plates full this week with interesting economic releases from around the world as well as geopolitical developments and currency and stock market moves from China.
First of all, Friday’s nonfarm payrolls will mark the first really important economic statistic of the New Year out of the United States. Economic data following the Fed’s first rate hike on December 16 have not exactly been stellar and this will be a key report for determining the timing of the Fed’s second rate hike. Currently, most economists expect that March or April will likely prove the key possible dates for an additional hike, but the decision will be data-dependent and weak data will have a negative impact on the dollar. Strong data on the other hand will boost the chances that the Fed will continue to hike rates at a slow but steady pace. 200 thousand new jobs are expected to have been created during December – about the same as the average pace of the previous year. During the week, there will also be important US data in terms of ISM manufacturing and services survey indices, the minutes of the crucial Fed meeting that resulted in the first rate hike in 9 years and factory orders.
In the Eurozone, there will also be important data releases such as flash inflation for December and the unemployment rate for November. Retail sales for November will also be announced. Headline inflation should climb further away from deflation territory at 0.3% year-on-year, while core inflation is expected to be the same as the previous month at 0.9%. The prospects for inflation could sway the European Central Bank to add to its stimulus at some point later in the year, although in the latest December meeting, it appeared that the consensus of the Governing Council did not favor more forceful steps such as the augmentation of the monthly asset purchases. This has moderated the bearish euro sentiment and the dollar has been unable to make progress against the euro since the day of that ECB meeting. Unemployment is expected to have held at 10.7% during November, while retail sales for the month were seen growing at a moderate 2% pace.
In other economic numbers, UK construction and services PMIs will be watched for the strength of the UK economy, while out of Australia retail sales, building approvals and trade balance could move the aussie. Chinese statistics such as the services PMI could also attract attention given fears about a Chinese economic slowdown. Weekly energy stocks out of the US may also be market-moving given all the focus on oil trading and volatile oil prices.
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