Your Weekly Fundamental View (Jan 02-06)

January 02, 2017 12:46

Need to know

This week's main focus is on FOMC Minutes and NFP. Markets expect some cues regarding next FOMC move. January NFP report, which is released the same time as Average Hourly Earnings report and Unemployment Claims, should provide us with cues on a current trend of US employment.

Coming up

Chinese Caixin Manufacturing is released on Tuesday, 2 January.

These news represent a special survey report of approximately 430 purchasing managers who rate the relative level of business.

Why should you care? Chinese data has a strong impact on equities and the Australian dollar. Chinese impact on the world's economy is very strong.

GBP Construction PMI is released on Wednesday, 4 January.

This data represents the level of a diffusion index based on surveyed purchasing managers in the construction industry.

Why should you care? Businesses tend to react quickly to market conditions, where the purpose of the PMI data is to provide information about current business conditions to managers and the companies' decision makers. The 50-point level separates expansion from contraction.

FOMC Meeting Minutes are released on Wednesday, 4 January.

January FED minutes will be important in understanding the further trend of the year 2017.

Why should you care? If the statement comes to be more hawkish than expected, it will be deemed good for the currency. If the statement is dovish, the USD might initially drop.

ADP Non-Farm Employment Change is due on Thursday, 5 January.

The ADP National Employment Report measures levels of non-farm private employment. The report is based on the actual payroll data from about 24 million employees processed by the Automatic Data Processing, Inc. It represents the estimated change in the number of employed people during the previous month, excluding the farming industry and government.

Why should you care? Job creation is an important leading indicator of consumer spending. ADP data usually predict weaker or stronger NFP reading.

US Unemployment Claims are released on Thursday, 5 January.

These claims are the earliest national economic data, representing the number of individuals who filed for insurance for the first time during the past week. If the actual result comes weaker than the forecast, it would be deemed good for the currency.

Why should you care? The number of unemployed people is an important signal of the overall economic health and could hint at future monetary policy steps.

Crude Oil Inventories are released on Thursday, 5 January.

A buildup in crude oil inventories usually signals decreasing demand from refiners. On the other hand, a drop would signal that refiners are still producing at elevated levels and the inventory overhang in oil products could continue. This is primarily a US indicator, but it also affects CAD due to Canada's huge energy sector.

Why should you care? The price of petroleum products influences inflation, which impacts oil-dependent industries.

Non-Farm Employment Change and Average Hourly Earnings are released on Friday, 6 January.

Source: NFP numbers in last 5 years

NFP data represents the overall change in the number of employed people during the previous month, excluding the farming industry while Average Hourly Earnings represent the change in the price businesses pay for labour, excluding the farming industry.

Why should you care? The Federal Open Market Committee and traders usually pay more attention to the core data. If the actual report comes better than the forecast, it will be good for the currency. The low inflation rate, currently at 1.3% and below the 2% target rate, is keeping the FED from raising rates. Traders should watch for possible surprises, as any negative move to the unemployment rate could send the USD lower.