Bill Baruch, president and founder of Blue Line Futures, reviews and previews the euro, Japanese yen...
Key Forex Announcements and Events This Week
02/24/2009 12:41 pm EST
Many of the major currency pairs are still trading near their 2008 or 2009 highs/lows, but with key events like Federal Reserve chairman Bernanke’s testimony before the Senate, UK and US GDP revisions, and euro zone CPI, breakouts could ensue.
US Consumer Confidence (Feb.), Fed’s Bernanke Testifies Before Senate—February 24
The Conference Board’s consumer confidence index for the month of February is forecast to reach a fresh record low of 36.0, down from 37.7. With record keeping having begun in 1967, the plunge in sentiment makes the extent of the recession even more clear. However, with Federal Reserve chairman Ben Bernanke due to testify before the Senate on the economic and Fed policy, the consumer confidence result may have little impact on the markets. Instead, traders will be listening closely for more detailed outlooks on growth, unemployment, inflation, and the financial markets. Bearish commentary could weigh heavily on risk appetite, and as a result, it will be important to keep an eye on the link between the currency markets and stocks, as the Japanese yen hasn’t been responding as strongly to shifts in equities while the US dollar still tends to benefit from flight-to-quality.
UK Gross Domestic Product (GDP) - Q4—February 25
The 04:30 ET preliminary reading of Q4 GDP for the UK is forecast to revise even lower, down to -1.6% from -1.5%, which would still mark the lowest level since Q2 1980. The UK has been hit particularly hard by the credit crunch, especially since the country became one of the biggest financial centers in the world. This has translated into a full-on collapse of the housing market, climbing job losses, and weak consumption. Furthermore, with growth slowing around the world, demand for British exports has declined as well, putting a large burden on manufacturers. Overall, a greater-than-expected decline could lead the British pound lower as the data would raise the odds that the Bank of England will cut rates again on March 5. On the other hand, if GDP is a bit better than forecast, the currency could gain.
US Durable Goods Orders (Jan.)—February 26
Signs that domestic demand is showing no sign of recovery should continue to emerge on February 26 as US durable goods orders are forecast to have dropped 2.3%, and even excluding transportation, are anticipated to fall 2.0%. All told, this would mark the sixth straight month in which the headline reading failed to rise, and while this will have the most impact on forex trading, the markets should keep an eye on non-defense capital goods orders excluding aircraft, as this number serves as a leading indicator for business investment. The three-month annualized figure has fallen sharply over the past few months, and combined with the weak outlook for the headline reading, risk aversion could linger and ultimately lead the US dollar higher.
Euro Zone Consumer Price Index (YoY) (Jan.)—February 27
Eurostat inflation estimates for the euro zone have shown that CPI may have fallen to a 1.1% annual pace during January, which would mark the lowest since 1999, but more importantly, it remains below the European Central Bank’s 2.0% inflation target. If Eurostat confirms this at 5:00 ET, the euro could pull back, especially ahead of the ECB's expected rate cut on March 5. On the other hand, if CPI is higher than anticipated, the currency could gain as the markets will speculate that the central bank may pause in their efforts to make monetary policy more accommodative.
US Gross Domestic Product (QoQ) (Q4)—February 27
The 08:30 ET preliminary reading of Q4 GDP for the US is forecast to revise even lower after initial estimates showed the index down 3.5%. The latest results may show a sharp 5.4% contraction, which would still be the worst since Q1 1982. The National Bureau of Economic Research (NBER) has already declared that the US has been in recession since December 2007, but a plunge in GDP in line with expectations will only suggest that the contraction in growth will continue to be worse than previously expected. The Federal Reserve really has no room to make monetary policy more accommodative, so traders should watch for the impact of this report on equities, as a surge in risk aversion may only lead the US dollar higher despite the disappointing fundamental scenario.
By Terri Belkas, currency strategist, DailyFX.com
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