Holiday Season To Offer Quiet Market Sessions

December 21, 2015 12:47

Federal Reserve's once in a decade interest rate lift, to between 0.25% and 0.50%, coupled with the optimistic tone of Fed Chair, helped raising expectations for further interest rate hikes in 2016 and fueled the US Dollar Index (I.USDX) to snap a two-week of losing streak with more than 1% gain on a weekly basis. The Euro, however, remained weaker with ECB's monetary policy divergence as compared to the US Fed and a dovish message from the central bank's chief economist. Moving on, the GBP maintained its decline against majority of its counterparts as one of the BoE's MPC members favored a bit more of wait for the central bank's interest rate lift considering weaker inflation scenario while lesser than expected Earnings growth & higher Claimant Count Change became some more reasons for the UK currency to maintain its south-run. Moreover, the JPY remained firm after the BoJ announced changes in its massive stimulus program rather than altering the amount of QE while the NZD extended its gains with an improvement in dairy prices & higher GDP print; however, the AUD and CAD kept running into losses as global supply glut and pessimism at China favored additional downside of major commodity prices, including Copper and Crude.

With the Christmas just around the corner, market players are less likely to participate actively during final two weeks of 2015, resulting quiet trading sessions; however, GDP numbers from Canada, UK & US, coupled with US Durable Goods Orders and housing market details, are some of the important economics that might support Forex liquidity during the current holiday shortened week.

US GDP May Direct Further USD Moves

After global markets celebrated Fed's interest rate hike, the next question relates to future moves of the US central bank which recently sound more hawkish for its economic growth. Hence, final reading of Q3 2015 GDP becomes more important for the USD traders to determine whether the Fed has enough scope for further interest rate lift or not.

The US GDP registered considerable growth of 3.9% during Q2 2015; however, early estimations concerning third quarter growth marked 2.1% increase in US economic activity while final reading for the same, scheduled for Tuesday release, is expected to print 1.9% number. Considering recently upbeat US economics, the GDP is more likely to print a welcome number, offering an ease to the US central banker in further rate hikes; though, a pessimistic reading may raise the bars for the Fed to announce future lifts in its benchmark interest rate.

Other than the GDP, numbers relating to Existing and New Home Sales, scheduled for Tuesday and Wednesday respectively, coupled with Wednesday's Durable Goods Orders, are some other indicators that may help determine near-term USD moves. While Existing Home Sales are likely to decline a bit with 5.32M, compared to 5.36M prior, the New Home Sales number is expected to mark three months' high with 507K against 495K printed in October. Moreover, Durable Goods Orders may disappoint the USD traders with -0.6% contraction versus its 3.0% gains for the month of October while Core reading for the same is likely printing 0.1% growth against 0.5% prior.

Given the weaker readings by the headline US economics, mainly driven by the GDP, the Federal Reserve might have to wait for longer in order to announce another interest rate hike, favoring year-end profit booking moves by the US Dollar.

Growth Numbers To Help Forecast GBP & CAD Trend

Off-late the GBP has been on its southward trajectory as weaker economic readings, coupled with dovish messages from BoE members, favored prolonged easy monetary policy by the UK central bank. Though, higher than forecasted 0.5% growth rate by the Q3 2015 UK GDP number, scheduled for Wednesday release, may portray the nation's economic strength and harm some of the policy doves. Hence, a better print, more than the 0.5% second estimate & the previous 0.7% mark, could help the UK central bank in altering its economic outlook and signal an interest rate hike, which in-turn could trigger GBP up-move. In addition to the GDP number, UK Current Account detail, also scheduled for release on Wednesday, becomes an important indicator to foresee GBP moves. The current account deficit is likely to widen to -21.3B against its previous -16.8B and may magnify the recent GBP downside if the actual figure matches consensus.

Canadian Dollar (CAD) maintained its south-run ever since the Crude prices, nation's main export, plunged; however, monthly reading of the GDP and Retail Sales, scheduled for release on Wednesday, becomes important to forecast near-term moves by the Loonie, as it is nicknamed. Even if the GDP and Retail Sales both registered a -0.5% print during their latest announcement, chances witnessing downbeat numbers are higher as list of headline Canadian numbers have been pessimistic off-late. Should the Canadian headline numbers keep portraying weak economic fundamentals, coupled with on-going decline in Crude prices, the CAD is more likely to extend its decline against majority of its counterparts.

Japanese CPI, Unemployment Rate & Spending Details May Portray JPY Moves

Even if the JPY traders considered a change in BoJ's stimulus as a positive indicator and provided additional strength to the Japanese currency, monthly readings concerning Household spending, CPI & Unemployment Rate, scheduled for Friday, become important to foresee further JPY moves.

While the Household Spending is likely to cut its recent downside of -2.4% with -2.1% and CPI numbers for Tokyo Core CPI & National Core CPI are likely to improve, the Unemployment rate is expected to mark a higher number of 3.2% from its 3.1% prior. If the Japanese inflation numbers disappoint markets and the unemployment rate also ticks higher, concerns relating to the need of additional QE from BoJ can be renewed, favoring the JPY downside; however, safe-haven demand of the same Japanese Yen may help limit further decline by the currency.

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