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FX Markets Turn Attention to Chinese and US Data, Fed Speakers this Week

FX Markets Turn Attention to Chinese and US Data, Fed Speakers this Week

Talking Points:

- Two critical Chinese data points due out on Tuesday.

- Eight Fed policy speeches this week (not counting Chair Yellen’s), with five due on Thursday.

- Only important US economic data is due out on Friday, and both pertain to the US consumer.

See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.

01/10 Tuesday | 03:30 GMT | CNY Consumer Price Index (DEC)

The last Chinese inflation print of 2016 is expected to show prices falling to +2.2% y/y from +2.3% y/y with consumer unlikely to be affected by the recent rise in commodity prices. The price of food stuffs in the release will be closely watched after a +4% y/y increase in November helped push inflation to +2.3% y/y from a prior month’s +2.1% y/y. The National Bureau of Statistics says that prices rose on average by 2% y/y in the first 11-months of 2016, still below Beijing’s target of around +3% y/y. Further signs of disinflation, which in viewed in context of the recent Chinese Yuan selloff, may serve to heighten concerns over the domestic Chinese market.

Pairs to Watch: AUD/JPY, USD/CNH

01/10 Tuesday | --:-- GMT | CNY New Yuan Loans (DEC)

Chinese fiscal and monetary authorities have been dealing with a capital exodus in recent weeks, with the Chinese Yuan falling precipitously against the US Dollar in December. Although officials have been taking steps in recent days to pare the declines, it’s clear that issues in the domestic Chinese economy, mainly over-indebtedness among corporates, is starting to weigh growth. Further evidence that credit growth is slowing down could foster further discontent over recent market developments. Economists are expecting the figure to coming in at 676.0b, down from 794.6b in the prior month.

Pairs to Watch: AUD/JPY, USD/CNH

01/12 Thursday | 13:30-18:45 GMT | USD Five Fed Policymakers Give Speeches

Amid an otherwise quieter US economic calendar, the sheer volume of Fed policymakers speaking over the coming days necessarily suggests that market participants will eagerly be watching the newswires for hints over potential changes in monetary policy. After a period of steady labor market improvement and signs finally emerging that wage growth is picking up (per the last NFP report), Fed speakers will be watched for clues about 1) the timing of the next rate hike (markets are currently pricing in June 2017) and 2) the pace of normalization (are we more likely to see two or three rate hikes). Of the eight speeches this week (not counting Fed Chair Yellen’s remarks to educators, which won’t discuss future monetary policy), five of them are clustered on Thursday. As US Treasury yields move around these remarks, so too will the US Dollar; most important may be how each individual policymaker has factored in President-elect Trump’s much-hyped fiscal stimulus into their expectations.

Pairs to Watch: EUR/USD, USD/JPY

01/13 Friday | 13:30 GMT | USD Advance Retail Sales (DEC)

Consumption is the most important part of the US economy, generating nearly 70% of the headline GDP figure. The best monthly insight we have into consumption trends in the US might arguably be the Advance Retail Sales report. In December, consumption strengthened further, according to a Bloomberg News survey, with the headline Advance Retail Sales set to increase by +0.7% (m/m) for the third consecutive month. The Retail Sales Control Group, the input used to calculate GDP, is due in at +0.4% from +0.1% (m/m). Higher consumer confidence after the US elections may be translating into looser purse strings for consumers, which will help drive US growth for Q4’16. As US Treasury yields move, so too will the US Dollar.

Pairs to Watch: EUR/USD, USD/JPY

01/13 Friday | 15:00 GMT | USD U. of Michigan Confidence (JAN P)

The confidence index is expected to drift slightly lower to 98.2 as US consumers await President-elect Trump to provide more detail on his tax and spending policies. November’s jump to 98.5, from a prior month’s 92.6, was driven by consumer expectations that Trump would create more jobs (although wage gain expectations were limited). Speaking after November’s sharp rise, U. of Michigan’s Surveys of Consumers Chief Economist Richard Curtin said that favorable expectations could help jump-start growth before the actual enactment of policy changes, and form higher performance standards that will be used to judge the Trump presidency. As US Treasury yields move...

Pairs to Watch: EUR/USD, USD/JPY

Read more: Improved Fundamentals in ST Insulating Euro from LT Political Concerns

--- Written by Christopher Vecchio, Senior Currency Strategist, Nick Cawley, Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.