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Weekly Outlook: January 14 - 18

Investing.com - This week investors will be looking ahead to Tuesday’s data on U.S. producer price inflation as they continue to gauge the outlook for policy tightening by the Federal Reserve this year.

If figures indicate that inflationary pressures are cooling, there could be a further reprieve from concerns over the prospect of additional rate hikes in the coming months.

A number of Fed officials will also be speaking this week, giving them additional opportunities to reassure market watchers that they will take a patient approach towards monetary policy.

China is to publish what will be closely watched trade figures on Monday amid the ongoing trade war between Beijing and Washington.

The British parliament is due to hold a vote on Prime Ministers Theresa May’s Brexit deal on Tuesday after the first attempt at voting on the agreement was postponed last month.

Meanwhile, the euro zone is to publish revised inflation figures on Thursday and the UK is to release retail sales data on Friday.

The U.S. dollar pushed higher on Friday, even as the greenback’s outlook remained bleak amid cautious signals from the Fed about further rate hikes.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, ended Friday up 0.14% at 95.25, but posted its fourth straight weekly decline.

Greg Anderson, global head of FX strategy at BMO Capital Markets in New York, said the Fed’s rate outlook was just one factor for the dollar’s weakness so far in January.

The Fed chairman said on Thursday in a forum at the Economic Club of Washington that the U.S. central bank intends to shrink its balance sheet further, suggesting it is not done tightening monetary policy just yet.

Markets, however, are pricing in no further rate hikes by the Fed this year.

Data showing U.S. consumer prices in December fell for the first time in nine months in December had little impact on the market, but it backed the Fed’s cautious stance about raising rates this year.

Aside from the Fed’s dovish rate outlook, Shaun Osborne, chief FX strategist, at Scotiabank in Toronto, cited cyclical, structural and secular trends, which could also pressure the dollar in 2019.

“The outlook for relative central bank policy has reached its climax in terms of offering the U.S. dollar support, and widening fiscal and current account deficits are expected to deliver medium-term weakness in the currency,” Osborne said.

“The outlook for relative central bank policy has reached its climax in terms of offering the U.S. dollar support, and widening fiscal and current account deficits are expected to deliver medium-term weakness in the currency,” Osborne said.

The euro was little changed against the dollar in late trade, with EUR/USD at 1.1467.

The greenback was also little changed against the yen and the pound, with USD/JPY at 108.54 and GBP/USD changing hands at 1.2849.

Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.

Monday, January 14

Financial markets in Japan will be closed for a holiday.

China is to release data on trade and direct foreign investment.

New Zealand is to release a report on business confidence.

Tuesday, January 15

In the UK, parliament members are due to hold a second attempt to vote on Prime Minister Theresa May’s Brexit deal.

European Central Bank President Mario Draghi is due to speak at an event in Strasbourg.

The U.S. is to release figures on producer price inflation and the Empire manufacturing index is also on tap.

Kansas City Fed President Esther George is to speak.

Wednesday, January 16

Australia is to release data on consumer sentiment.

Bank of England Governor Mark Carney is due to testify, along with other policymakers, on the Financial Stability Report before the Treasury Select Committee.

The UK is to release producer price inflation data.

Thursday, January 17

Central bankers and finance ministers from the G20 nations are to hold a summit meeting in Tokyo.

Bank of Japan Governor Haruhiko Kuroda is due to speak at the G20 summit.

The euro zone is to publish revised inflation figures.

The U.S. is to publish the weekly report on initial jobless claims as well as the Philly Fed manufacturing index.

Fed Governor Randal Quarles is to speak.

Friday, January 18

The G20 summit is to continue for a second day.

The UK is to release data on retail sales.

Canada is to release inflation figures.

New York Fed President John Williams is to speak.

The U.S. is to close out the week with preliminary data on consumer sentiment.

-- Reuters contributed to this report

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