Weekly Outlook of Financial Markets for February 18-22

Major commodities prices including natural gas, gold and silver tumbled down last week; major currencies pairs including the Euro/USD and Aussie dollar/USD slightly declined in the previous week. Will this trend continue next week? In the forthcoming week several reports, speeches and testimonies may affect the financial markets. These include: FOMC minutes, ECB President testifies, minutes of BOJ monetary policy meeting, U.S housing starts, Canada’s retail sales, German manufacturing PMI, U.S CPI and PPI, Governor Stevens speaks, minutes of MPC meeting, and U.S. jobless claims. Here is an economic outlook for the week of February 18th to February 22nd regarding the U.S, Euro Area, Australia, Japan, Canada, and Great Britain.   

(All times GMT):

Monday, February 18th

14:30 – ECB President Testifies: Mario Draghi will testify in the European Parliament’s Economic and Monetary Committee in Brussels. If Draghi will change his wording (from his previous speeches) regarding the progress of the EU economy, the testimony could affect the direction of the Euro;

23:50 – Bank of Japan –Monetary Policy Minutes: Bank of Japan will come up with the minutes of the latest monetary policy meeting and rate decision. In the previous meeting, BOJ decided to keep its asset purchase program unchanged. The minutes could offer some insight behind the previous decision and could affect the Yen, other currencies and commodities;

00:30 – Minutes of Australia’s Bank Monetary Policy Meeting: The minutes of the latest monetary policy meeting of the Reserve Bank of Australia may reveal the main reasons behind the board’s decision to keep the basic interest rate at 3%; the minutes of this meeting may affect the Australian dollar and consequently commodities rates including oil and gold;

Tuesday, February 19th

10:00 –German ZEW economic sentiment: The upcoming report will pertain to the ZEW indicator of economic sentiment for Germany for February. In January the ZEW indicator for Germany rose to reach 31.5 points; if Germany’s economic sentiment will further grow, the Euro will plausibly strengthened against other currencies including the USD;

23:50 – Japanese Trade balance: The Japanese trade balance deficit for December 2012 declined by 6% compared to November, and reach 800 billion YEN (roughly $8.7 billion) deficit (seasonally adjusted figures). This fall is due to the higher rise in exports (by 2.4%) than in imports (by 1.2%). Japan is among the leading importers countries of commodities, including crude oil and gold; its trade balance could offer some insight regarding Japan’s developments in demand goods and services;

Wednesday, February 20th

09:30 – Claimant Count Change: This report will show the developments in the number of unemployed in GB; as of the previous month’s report this figure had decreased by 12.1k;

09:30 – Minutes of MPC Meeting: in the latest MPC meeting, the Bank kept the rate unchanged at 0.5% and the asset purchase program at £375 billion; the MPC still has concerns regarding GB’s inflation rate. The minutes of the previous meeting might offer some insight behind this decision;

Tentative – German 10 Year Bond Auction: the German government will issue its monthly with bond auction; in the latest auction, which was held during January, the average rate reached 1.56%;

13:30 – U.S. Housing Starts: the U.S Census Bureau will come out with its U.S housing starts update for January 2013; this report was historically correlated with gold price – as housing starts rise, gold prices tended to decline the following day (even when controlling to the U.S dollar effect); in the previous monthly report, the adjusted annual rate reached 954,000 in December 2012, which was 12.1% above November’s rate;

13:30 – U.S. Building Permits: in the previous update, building permits rose during December by 0.3% (M-o-M) in the adjusted annual rate of building permits was 903,000. If building permits will continue to increase, it may indicate that the U.S housing market (from this aspect) is growing (the recent U.S building permits update);

13:30 – U.S. Producer Price Index: This report will present the changes in the PPI during January 2013, i.e. the inflation rate from the producers’ stand point. In the previous report regarding December, this index for finished goods declined by 0.2% compared with November’s rate but rose by 1.3% in the past 12 months; this news might affect commodities prices;

15:30 – U.S Crude Oil Stockpiles Weekly Update: the EIA (Energy Information Administration) will come out with its weekly report on the U.S oil and petroleum stockpiles for the week ending on February 15th; in the latest update for February 8th, stockpiles fell by 7.2 ml bl to reach 1,791.9 ml bl.

19:00 – Minutes of January’s FOMC Meeting: Following the January FOMC meeting, in which the Fed left its monetary policy unchanged, the bullion market had a very short term reaction to this news – gold and silver prices increased on the day of the announcement only to tumble down the next day. The minutes of the latest FOMC meeting might add some insight behind the speculations around the future steps of the FOMC; the minutes might clarify the Fed’s course of action vis-à-vis the exit strategy for its current running QE programs. If the Fed will put a time limit or hint of changes in the expansion of its monetary policy, this could pull down bullion rates;

Thursday, February 21st

08:30 – Flash German, French and Euro Zone Manufacturing PMI: In the previous report regarding January 2013, the German PMI rose to 48.8 i.e. the manufacturing conditions are still contracting at a slightly slower rate. This report serves as an indicator to the economic developments of the Euro Area’s leading economies’ manufacturing conditions; this news, in turn, may affect the Euro/USD currency pair and consequently also major commodities rates;

Tentative – Spanish 10 Year Bond Auction: the Spanish government will issue another bond auction; in the previous bond auction, which was held at the first week of December, the average rate reached 5.29% – the lowest rate in over six months; if the rate will continue to fall, it could suggest that the EU is regaining the confidence of traders;

13:30 –U.S Core Consumer Price Index: This monthly report will refer to the main developments in the core consumer price index for January 2013. According to the U.S Bureau of Labor statistics during December, the CPI remained unchanged (M-o-M); the core CPI edged up by 0.1%; the core index rose over the past twelve months by 1.9%.

13:30 – U.S. Jobless Claims Weekly Report:  this weekly update will pertain to the shifts in the initial jobless claims for the week ending on February 15th; in the previous report the jobless claims declined again by 27k to reach 341k; this upcoming weekly report may affect the U.S dollar and consequently commodities and stocks markets;

15:00 – U.S. Existing Home Sales: This report will pertain to the shifts in U.S. existing home sales for January 2013; in the latest report regarding December 2012 the number of homes sold fell to a seasonally adjusted annual rate of 4.94 million houses; if this trend will continue it may pull down the U.S dollar;

15:00 – Philly Fed Manufacturing Index: This monthly survey presents an estimate for the progress of the US manufacturing conditions. In the previous January survey, the growth rate fell from +8.1 in December to -5.8 in January. If the index will continue to fall it may adversely affect not only U.S Dollar but also American stock market, and commodities rates (the previous Philly Fed review);

15:30 – EIA U.S. Natural Gas Storage Update: the EIA weekly report of the U.S. natural gas market will pertain to the recent developments in natural gas production, storage, consumption and rates as of February 15th; in previous weekly report, natural gas storage declined by 157 Bcf to 2,527 Bcf;

22:30 –Governor Stevens speaks: Reserve Bank of Australia Governor will give a speech before the    House of Representatives; he might refer to the recent RBA monetary policy meeting, in which the RBA left the policy unchanged; this speech may influence Aussie dollar traders;

Friday, February 22nd

09:00 – German Business Climate Survey: This survey analyzes the changes (on a monthly basis) of the business climate of Germany. In the previous report for January 2013, the business climate index increased from 102.4 in December to 104.2 in January; if this trend will continue, it might pull up the Euro;

13:00 – Canada’s core CPI: This report will refer to the CPI and core consumer price index (controlling the volatile components such as energy, fruit and vegetables) for January 2013. According to the Canadian CPI report for December 2012, the core CPI edged up by 0.1% during the month. This report might affect the Canadian dollar, which is also strongly correlated with commodities rates;

13:30 – Canada Retails Sales (December 2012): This report will refer to the retails sales in Canada as of December. It may affect the path of USD/CAD currency pair, which is strongly linked with commodities prices. In the recent report regarding November 2012, retails sales edged up by 0.2%.

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