Inflation, retail sales and GDP mark the major theme for the week ahead. The UK will be releasing the monthly inflation figures for January followed by retail sales data later in the week. The inflation data will come after the BoE voted to keep rates unchanged. Retail sales figures will be closely watched data as the previous month showed a 1.5% decline.
In the U.S. the monthly consumer price index data will be coming out this week alongside the retail sales numbers. For the Eurozone, the flash GDP figures will mark the second revised GDP for the fourth quarter. No changes are expected as the Eurozone GDP is forecast to have grown 0.6% during the quarter.
Here’s a quick recap of the key inflation, retail sales and GDP events due this week.
UK Inflation expected to ease for a second consecutive month
Following the Bank of England’s decision to leave monetary policy unchanged at the meeting last week, focus turns to inflation data this week. The UK will be reporting the monthly inflation data on Monday. According to the economists polled, UK’s consumer prices are expected to ease to 2.9% in January. This follows December’s 3.0% inflation rise.
Consumer prices are expected to rise at a slower pace in January and marks a second consecutive month of slower inflation. Consumer prices had previously peaked at 3.1% in November. The Bank of England had hiked interest rates in November as inflation surged strongly. The 25 basis point rate hike came as officials tried to contain the strong inflation growth.
Consumer prices in the UK remain stubbornly above the BoE’s 2% inflation target rate. At last week’s meeting, the BoE Governor signaled that interest rates could rise faster than it expected. The markets brought forward the rate hike expectations from August to May. This will potentially mark a second rate hike after the Brexit event in June 2016.
U.S. consumer prices and retail sales in focus
Data from the U.S. will concentrate on the consumer price index data and retail sales figures that will be released on Wednesday. Economists polled have forecast that headline CPI in the U.S. is expected to rise 0.3% on a month over month basis. Core CPI that excludes the food and energy prices are expected to rise 0.2%, marking a slower pace of increase on the month.
On an annual basis, the headline CPI is expected to ease to 1.9% after CPI touched 2.1% in December 2017. Core CPI is also expected to ease to 1.7% in January after rising to 1.8%. However, with Trump’s tax cut policies in effect, consumer prices could potentially surprise to the upside.
Retail sales figures are also due on Wednesday. Headline retail sales are expected to rise 0.2%. This marks a slower pace of increase after retail sales jumped 0.4% previously. Excluding autos, retail sales are forecast to rise 0.5%, advancing from December’s gain of 0.4%.
Investors will be closely watching the inflation data especially with expectations mounting that consumer prices could turn the corner. Later in the week, producer prices index data will be coming out as well. Headline PPI is expected to rise 2.4% on the year, easing from 2.6% in December. Core PPI is also expected to ease from 2.4% to 2.1%.
Eurozone GDP for Q4 expected to confirm a 0.6% increase
The second revised estimates for the Eurozone GDP covering the fourth quarter ending December 2017 will be released this week. Economists polled expect to see no major changes to the GDP which was confirmed at 0.6% as per the initial estimate that was released a week ago.
Investors are likely to look past the revised GDP estimates with focus already turning to the first quarter of this year. Recent economic data from the Eurozone showed that based on the PMI activity across the manufacturing and services sectors, the Eurozone’s economy started the year on a strong footing.
However, there were some mixed economic signals especially from the forward looking indicators. Data showed that investor confidence in the Eurozone had weakened in February. The sentiment index fell to 31.9 in February compared to 32.9 previously. The decline marked the lowest level since a year. However, current conditions index rose from 48.0 to 49.5.
In general, when inflation is high, it makes a currency weaker, suppressing investment, and thus negatively impacting the exchange rate. When inflation is low, a currency is stronger, improving its exchange rate.
Economic data is a major short-term catalyst in the forex market. Since the dollar is one side of many currency pairs, U.S. economic releases tend to have the most pronounced impact.
Forex daily trading volume is approximately $6.6 trillion according to the 2019 Triennial Central Bank survey of FX and OTC derivative markets. Of this, the US dollar, euro and yen experience the highest turnover of trades.
The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or Bearish).
At a basic level, higher interest rates tend to lead to an appreciation in the value of a currency. In turn, the exchange rate is affected as the value of a currency increases in relation to others.
“Profit Parabolic” trading strategy based on a Moving Average. The strategy is referred to as a universal one, and it is often recommended as the best Forex strategy for consistent profits. It employs the standard MT4 indicators, EMAs (exponential moving averages), and Parabolic SAR that serves as a confirmation tool.
The way to make money fast in forex, is to understand the power of compound growth. For example, if you target 50% a year in your trading, you can grow an initial $20,000 account, to over a million dollars, in under 10 years. Break the norm, and gain more. Follow some of these tips and make your way into the big gains!
One of the simplest and most widely known fundamental strategies is value investing. This strategy involves identifying undervalued assets based on their intrinsic value and holding onto them until the market recognizes their true worth.
The forex market is primarily driven by overarching macroeconomic factors. These factors influence a trader's decisions and ultimately determine the value of a currency at any given point in time. The economic health of a nation's economy is a primary factor in the exchange rate of its currency.
You have $500 and decide that the acceptable risk level is 2% of your account. With 1:100 leverage, your need to choose ($500 * 0.02) / 100,000 * 100 = 0.01 lots. With $1000 on your account, you will be able to trade ($1000 * 0.02) 100,000 * 100 = 0.02 lots.
Many people start trading Forex with the hope of getting rich quick, but the reality is that most Forex traders fail. So, how many people actually succeed in Forex? The exact number is difficult to say, but estimates range from 5% to 10%. This means that the vast majority of Forex traders lose money.
In the forex market, day trading is a common strategy that involves opening trades and closing them within the same day. Forex traders can execute as many day trades as they want without being restricted by the PDT rule.
Inflation can also encourage investment. When money loses value over time, holding cash becomes less attractive. This can push individuals and businesses to invest in assets like stocks, real estate, or commodities, which typically provide better returns than cash holdings.
Well, the money market tends to mainly focus on the short run. Of course, as inflation rises, the nominal interest rate will eventually increase to compensate.
While some money market funds boast yields well above 4%, you don't want to put too much money into them, especially for long-term investing. Money market yields usually don't outpace inflation. And with the Fed planning to cut rates later this year, yields will likely decline.
Specifically, we show that 'bad news' about inflation -- that it is higher than expected -- can be 'good news' for the nominal exchange rate -- that it appreciates on this news -- if the central bank has an inflation target that it implements with a Taylor Rule.
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