FX Week Ahead Overview:
- As the holidays approach, reporting agencies from major economies are getting quieter: there are only seven high-rated events on the calendar this week.
- A confidence readings from Germany is set to slump as COVID-19 infections soar to their highest level during the pandemic.
- The supply chain and high inflation themes are in focus mid-week thanks to the releases of the November US durable goods orders and November US PCE reports.
For the full week ahead, please visit the DailyFX Economic Calendar.
12/21 TUESDAY | 07:00 GMT | EUR German GfK Consumer Confidence (JAN)
The Eurozone is in a state of economic disarray, thanks in part to a resurgence of pandemic fears in its largest economy. German COVID-19 infections have surged to their highest level over the past two years, leading to a slew of new restrictions and lockdowns being implemented to stop the spread of the omicron variant.
Accordingly, a Bloomberg News survey shows economists are anticipating the November German GfK consumer confidence reading to come in at -2.7 from -1.6 in October. This would be the lowest reading since June 2021 and would reinforce the ‘sell rallies’ bias among major EUR-crosses.
12/23 THURSDAY | 13:30 GMT | CAD Gross Domestic Product (OCT)
The Canadian economy was rapidly improving prior to the recent omicron variant outbreak, with robust jobs growth and a Bank of Canada pulling back stimulus efforts in order to head off rising inflation. But in recent weeks, slumping oil prices (energy accounts for 11% of Canadian GDP) and new restrictions on economic activity have sent the Loonie tumbling.
While forecasts are expecting the October Canada GDP figure to show a growth rate of +0.8% m/m, its fastest m/m increase since March 2021 (+1.3% m/m), the data may be too far in the rearview mirror to provide any relief for the Canadian Dollar.
12/23 THURSDAY | 13:30 GMT | USD Durable Goods Orders (NOV)
The US economy is heavily dependent upon consumption, insofar as it constitutes approximately 70% of US GDP. Durable goods are a key component of overall consumption. Durable goods are items with lifespans of three-years or longer – from refrigerators and washing machines to cars and airplanes. Because these items typically require greater capital investment or financing to secure, the durable goods orders report serves as a proxy for business’ and consumers’ financial confidence and health.
But these days, it also servers as a barometer for supply chain concerns during the pandemic. While a solid reading of +1.6% m/m in November is anticipated after the surprising -0.5% m/m contraction in October, the figures may mask the fact that US supply chains are still struggling; after all, orders are calculated as price multiplied by quantity, so increased costs can offset lower volumes. A miss on the November US durable goods orders report would likely prove costly to the US Dollar.
12/23 THURSDAY | 13:30 GMT | USD Personal Consumption Expenditure (NOV)
Arguably the most important data release of the weeks comes on Wednesday when the November US personal consumption expenditure (PCE) index is released. The PCE index – as well as the core PCE reading – are the Federal Reserve’s preferred gauges of inflation.
According to a Bloomberg News survey, US PCE is due in at +0.5% m/m from +0.6% m/m and unchanged at +5% y/y, while the core readings are due in at +0.4% m/m and +4.5% y/y from +0.4% m/m and +4% y/y. Markets may begin to discount a more aggressive Fed in the first half of 2022 if evidence mounts that US inflation pressures are persisting near multi-decade highs – good for the US Dollar, but likely bad for US stocks in the near-term.
12/23 THURSDAY | 23:30 GMT | JPY Consumer Price Index (NOV)
The Bank of Japan gets no love around these parts, thanks to the fact that Japanese inflation rates haven’t spurred a shift away from its ultra-accommodative policies in decades. And to an extent, the data due at the end of the week doesn’t cater to a significant shift in BOJ policy either. But with inflation readings globally surging, the November Japan CPI carries additional weight – if not as a market mover, but as a point of interest for the broader thematic influences that elevated price pressures have over central banks.
— Written by Christopher Vecchio, CFA, Senior Strategist