Economic fundamentals are back in focus for next week with key data releases likely to dictate major currency price action. Incidentally, traders will continue to eye speculation regarding the impending debt ceiling debate, along with U.S. earnings, as it coordinates with the rising concern over an early withdrawal of Fed stimulus.
U.K. Consumer Price Index (January 15th, 4:30AM EST)
Although not recently gaining attention, this month's U.K. consumer prices index report is expected to spark some volatility as the survey is anticipated to show a stabilization of prices at 2.7% annually. This would be the third month in a row, the report has shown inflationary pressures rising in the U.K., and would further dampen the likelihood of any BOE rate cut in the near term. And, given that the measure would be at the top end of the BOE 2-3% range, expect anything above 3% to warrant a letter from the central bank. Expect advances towards 1.6300 in GBPUSD on evidence of rising prices.
U.S. Retail Sales (January 15th, 8:30AM EST)
For the month of December, retail sales in the world's largest economy are expected to gain by 0.2%. This would be the second consecutive monthly increase, and the fifth in the last six months, for the report - positive for the U.S. economy. Remember, it is also likely to be one of the more pivotal retail sales reports due to the reflection of holiday spending. Subsequently, any declines are likely to be met with further U.S. dollar sell-offs - confirming weaker than expected consumption patterns.
Federal Reserve Beige Book (January 16th, 2:00PM EST)
Mid week action boasts the release of the Federal Reserve's Beige Book report. The survey is anticipated to show a slight pickup in activity throughout the country for the month, bolstered by previous regional and national economic surveys. National manufacturing activity returned to expansionary territory in December rising from a 2012 low. The takeaway here will be whether the pace of growth warrants further discussions over an early withdrawal of monetary stimulus by the Fed.
Australian Employment Change (January 16th, 7:30PM EST)
Australian employers are expected to have once again added to corporate labor forces in the month of December. The fourth consecutive monthly gain, the anticipated increase is expected to reinforce notions that the Australian economy remains resilient against the global slowdown. Incidentally, a positive figure here would only further boost the Australian dollar following better than expected economic figures from China - Australia's main trade partner. Expect Aussie bulls to remain fixated on 1.0600 and above test ahead of the release.
Chinese Gross Domestic Product (January 17th, 9:00PM EST)
Expectations are high that the Chinese economy ended 2012 with a bang, with overall growth anticipated to rise by 7.8% annually in the fourth quarter. This is a marked improvement from the third quarter, when the economy expanded by 7.4%, and would be the first uptick in growth since the beginning of 2010. Given the amount of pressure handed out by the investment community on the global slump, expect the news to be welcomed with a boost in higher beta currencies like the Australian dollar and euro.
U.K. Retail Sales (January 18th, 4:30AM EST)
Office for National Statistics data is expected to show further improvement in the consumer landscape, with the U.K. retail sales report anticipated to show a 0.2% month over month gain in December. Optimistic for the U.K. economy, it is key to remember that the advance is likely supported by holiday consumption and not organic fundamental gains. Nonetheless, expect the GBPUSD to advance - albeit minimally - on a tick higher.