The U.S. NFP hoopla may be over but Fed rate hike speculations are just getting started!
Planning on trading the major currencies this week?
Here’s a list of the major economic calendar events you’ll need to watch out for:
Major Economic Events:
U.S. inflation rate (Jan 12, 1:30 pm GMT) – Consumer price increases are expected to have sped up to 7.1% from a year ago in December. This is faster than November’s 6.8% annualized uptick and would mark the 10th consecutive month that inflation has overshot the Fed’s 2.0% target.
On a monthly basis, analysts see the headline inflation slow down from 0.8% to 0.5% while core CPI is expected to maintain its 0.5% growth.
High inflation, combined with lower unemployment rate and higher wages (read: a tightening labor market), would support the Fed’s urgency to normalize its monetary policies faster than it initially planned.
U.K.’s monthly GDP (Jan 14, 7:00 am GMT) – The U.K.’s economy could have grown by 0.3% from October to November after registering a three-month low growth of 0.1% in October.
Even a disappointing release isn’t expected to rain on the Bank of England (BOE)’s parade though. Markets are shrugging off Omicron variant concerns and are still pricing in a February rate hike for the central bank.
U.S. retail sales (Jan 14, 1:30 pm GMT) – U.S. retail activity may have only maintained its 0.3% November growth or even slowed down in December.
Even core retail sales is expected to dip from 0.3% to 0.2% for the month.
The report, scheduled at the end of the week, could help cement convictions of the Fed raising its rates as early as March. Or inspire end-of-week profit-taking. Make sure you’re prepared for either scenario!
Forex Setup of the Week: GBP/JPY
I’m still keeping my eyes on last week’s GBP/USD Fib retracement opportunities but this time I gotta add GBP/JPY’s weekly chart on my watchlist.
The pair is knocking on the 157.00 resistance zone that hasn’t been breached since mid-2016. That was before Trump was made POTUS!
A strong uptrend and a couple of green candlesticks make an upside breakout possible in case we see risk-on or anti-yen themes this week.
Between expectations of a February BOE rate hike and USD/JPY bulls on the lookout for a hawkish rate hike schedule, it probably won’t take much to push GBP/JPY higher.
Don’t discount a fakeout or a downswing though! The long-term range resistance could attract pound bears and make it easy for traders to short in case we see risk aversion in the markets in the next few days.