Weekly market Analysis

Commitments of Traders

Speculators covered  good chunk of their EUR shorts and became NET LONG on CAD futures. The rest remains unchanged from the previous week.

February is pretty much out of the picture at this stage. Probabilities rose by few percent across the board. March is 25% ( up from 23%), May is 43% ( up from 40%), May is 43% ( up from 40%), June 72% ( up from 70%), July 77% ( up from 74%) September, October and December recorded no change. It seems like the next rate hike could be probable around June, July 2017

This Week's Risk Events

Tuesday 31 Jan

6:30am JPY BOJ Press Conference + Tentative JPY Monetary Policy Statement, JPY BOJ Outlook Report, JPY NBOJ Policy Rate
The is no change expected in the BOJ monetary policy. Watch the tone and comments for any hints regarding the policy for the rest of the 2017.
10:00am EUR CPI Flash Estimate y/y, Core CPI Flash Estimate y/y
This could be a market mover given the recent comments about Eurozone inflation approaching ECB’s targets. Traders will be looking to confirm this statement. Any deviations to the downside will send Euro down.
10:00am EUR Prelim Flash GDP q/q
Market is expecting 0.4% VS 0.3% previously. The last two months printed 0.3%.
1:30pm CAD GDP m/m
Expected to print 0.3% vs a negative 0.3% prior month. This will be an interesting one given speculators became net long on CAD futures last week. A positive GDP print could significantly move CAD prices. CAD is highly correlated to the Oil prices so it worth looking at those two markets together before deciding to trade.
9:45pm NZD Employment Change q/q
Employment is expected to come at 0.8% vs 1.4% prior. The expectation is down compared to previous months. 0.8% was last seen early 2016.

Wednesday 1 Feb

1:00am CNY Manufacturing PMI
PMI is expected to come out at 51.2 vs 52.8 prior. Anything less than 50 suggests contraction. There should be no surprises here. Chinese PMI should stay in line with expectations. Australian Dollar is most likely to be affected by this report
9:30am GBP Manufacturing PMI
Expected to come out at 55.9, slightly lower from previous 56.1. This figure has been clearly trending up in the recent months. There is no indication that this would change now. Unfortunately, all positive figures from UK have been overshadowed by Brexit news. As manufacturing is only small part of UK economy, this report is unlikely to have impact on GBP anyway.
7:00pm USD FOMC Statement
FED’S officials will announce interest rate decision. There is no change expected. FED WATCH indicated 4% probability of the hike at this meeting. Market will focus on the tone to gauge if the FED is still on track to deliver 4 hikes in 2017. According to the FED WATCH, this is less and less probable.

Thursday 2 Feb

12:00pm GBP BOE Inflation Report, Monetary Policy Summary
There is no change in interest rates or the share of vote expected from BOE. If there is a change in votes suggesting the rate cut, GBP is likely to sell off. Market will focus on the tone of statement and the connection to the Brexit situation.

Friday 3 Feb

1:45am CNY Caixin Manufacturing PMI
Market expects 51.8 vs 51.9 previously. PMI has been stable and printing around 51.9 over the last few months. This is expected to continue. Any deviations from the expected number could weight on the price of Australian Dollar.
9:30am GBP Services PMI
Much more important report (than manufacturing PMI). Market expects 55.8 v lower 56.2. Again, PMI has been solid and showing improvement m/m. The reaction will depend of previous BOE statement (Wed 2nd Feb).
1:30pm USD Average Hourly Earnings m/m,
Expected at 0.3% vs 0.4% prior. This is an important report and tends to move USD more than NFP data. Lower than expected print will suggest cracks in wages growth. Combined with bad NFP could bring USD down and question further rate hike later this year.
1:30pm Non-Farm Employment Change
Jobs are expected to come in at 170K vs 156K. NFP has been showing lower numbers recently but they all were revised higher and market takes it as a positive sign. It is likely, this will be the case again. I expect lower NFP, previous figure revised upwards and market reading it as a good news for USD. Any number would have to be considered with earnings figure to gauge the impact.