US DATA TAKE CENTRE STAGE ON MONDAY
The global financial markets will be off to a busy start this week, with attention fixated on the US economic calendar.
Investors can expect a sparse release schedule from the European market on Monday. The Spanish government will report on retail sales at 08:00 GMT, followed by a report on Italian producer inflation two hours later.
In the United States, the Department of Commerce will issue its monthly personal income and outlays report at 1:30 GMT. The report is expected to show a 0.3% increase in personal income last month, accompanied by a 0.4% uptick in consumer spending.
Market participants are also looking at the personal income and outlays report for another reason: it contains the latest data on core personal consumption expenditures (PCE), which is the Federal Reserve’s preferred measure of inflation. The core PCE index is projected to rise 0.2% month-on-month, which translates into an annualized rate of 1.6%. The US central bank targets inflation at 2% annually. Although inflation remains below that level, the Fed has been slowly removing policy accommodation in response to a stronger economy.
Later in the morning, the Federal Reserve Bank of Dallas will report on the manufacturing business index for January. The monthly report is expected to show a sharp slowdown in regional factory activity.
Several high-profile US releases are scheduled throughout the week, culminating in Friday’s nonfarm payrolls report. The release is expected to show another month of solid hiring for the world’s largest economy, boosting optimism about the nation’s prospects. Other US data releases this week include factory orders and manufacturing PMI.
In the currency markets, all eyes will be on the US dollar, which is coming off the worst start to a year in decades. The US dollar index (DXY), which tracks the performance of the greenback against a basket of six competitors, fell below 90.00 last week. It was last seen trading at 89.22, having gained 0.2% from the previous close.
Europe’s common currency is coming off another week of solid gains. The EUR/USD closed firmly above 1.2400 on Friday and continues to trade above those levels at the start of Monday’s Asian session. The pair will continue to be supported so long as the dollar’s woes continue.
Like the euro, the British pound scored huge gains against the dollar last week, with cable rising above 1.4100 for the first time since the Brexit debacle. The GBP/USD was last seen trading at 1.4132. Its short-term outlook will be dictated by the US dollar and its response to high-profile economic data.
The Japanese yen backtracked slightly against the dollar on Monday but remains in a firm uptrend. The USD/JPY exchange rate was last seen trading at 108.76. The bears are eyeing fresh lows so long as the pair trades near the 108.50 mark.