The dollar dropped sharply in a very positive week. Is this temporary or does it represent a big change? Initial GDP figures for the US and the UK and two rate decisions are the major events this week. Here is an outlook on the main market-movers coming our way.
The upcoming Greek debt deal certainly helped improve the market atmosphere. In the US, jobless claims plunged dramatically to a nearly four-year low of 352,000 claims, 50,000 down from the prior week, while early expectations stood on 387K. The Philly Fed Index reached 7.3 points with a dominant employment factor. These good employment readings give further boost to the recovering job market. Will the job market continue to improve? Let’s start:
- Japan rate decision: Tuesday. The Bank of Japan decided to keep the monetary policy unchanged despite worries about the EU debt crisis effect. Overnight call rate remains between 0.0%-0.1% range. Furthermore the BOC downgraded its evaluation of domestic economy in light of the pause in growth and the strong yen. Nevertheless, analysts expect further easing measures in the near future. No change is forecasted.
- Euro-Zone German Ifo Business Climate: Wednesday, 9:00. German business sentiment climbed unexpectedly in December to 107.2 when surveyed firms showed confidence in Germany’s resilience to the EU debt crisis in 2012.Germany continues to receive new manufacturing orders from the US and China which helps avoid the EU recession atmosphere. A further increase to 107.8 is expected now.
- UK GDP: Wednesday, 9:30. GDP Preliminary Estimate increased by 0.5% for the third quarter a bit higher than the 0.4% growth rate predicted by analysts. However the headline number is believed to be lower giving room for new quantitative easing measures in the near future. A drop of 0.1% is predicted now.
- US Pending Home Sales: Wednesday, 15:00. The number of home sales agreements leaped by 7.3% in November after rising 10.4% in October driven by the comfortable long-term mortgage rates and relatively low prices. Nevertheless the number of done deals is smaller due to contract cancellation. A small increase of 0.3% is expected.
- US FOMC Statement: Wednesday, 19:15. The main issues discussed by the FOMC committee in its November meeting included a moderate growth outlook for the US economy due to a slowing global growth. Improvement in the job market conditions with no change in unemployment rate. Household spending has progressed but business growth is lower than expected and the housing sector remains depressed. The Committee decided to maintain monetary policy and keep the target range at 0 to 0.25%. No change in policy is expected now.
- New Zealand rate decision: Thursday, 20:00. Monetary officials in New Zealand maintained the Official Cash Rate at 2.5%. Governor Alan Bollard noted several negative effects of the global slowdown on NZ economy and warned form further extensive damages in the future. However the current kiwi depreciation is contributing to raise exports. The same rate is expected to be announced.
- US Durable Goods Orders: Thursday, 13:30. Manufacturers demand for long-lasting products climbed by 3.7% in November amid an increase in planes orders. However Core Durable Goods Orders excluding airplanes increased by a mere 0.3%, the third decline in a row, raising concerns about the EU debt crisis effect on the US manufacturing sector. An increase of 2.3% is expected in Durable Goods Orders while 1.0% rise is forecasted in the Core orders.
- US Unemployment Claims: Thursday, 13:30. Jobless claims dropped last week by 50,000 to a four-year low of 352,000 indicating another improvement in the US job market. This reading came after 402,000 claims in the previous week and is much lower than the 387,000 predicted by analysts. A rise to 374,000 claims is expected now.
- US New Home Sales: Thursday, 15:00. New U.S. single-residential home sales increased to 315,000 units in November after 310,000 units in the previous month close to the 314,000 predicted by analysts. This encouraging figure together with other housing data confirms a positive trend in the housing sector. Another increase to 322,000 is expected now.
- US Advance GDP: Friday, 13:30. The third quarter saw an initial read of 2.5%, which was eventually lowered to 1.8%.The third quarter estimate is much more than achieved in the first half of 2011. The elevated reading suggests a real expansion in the US economy. A growth rate of 3.1% is expected this time.
*All times are GMT.