Week Ahead in FX (Jan. 10 – 14): Eyes on U.S. Inflation and U.K. GDP Data

 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.

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