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The Week Ahead: Can EURUSD surge to new highs?

Summary:

  • Semi-important data from the Eurozone and UK

  • Investors wait for the ECB minutes scheduled for Thursday

  • US Inflation figures to take the stage on Friday

A start of 2018 has brought huge moves on the markets. EURUSD was among the movers as the pair attacked towards the end of 2017 with a lot of momentum amid weakness of the US dollar. Was that surge justified? Traders will be looking for answers this week in the US data on inflation and will be digesting ECB minutes in search for clues regarding future monetary decisions. Oil prices saw an impressive rally in the final quarter of 2017 and data on US inventories will be scrutinized by traders looking for more fuel to this rally.

8:30 am BST - UK Halifax House Price Index for December. A data concerning the condition of the UK housing market. Surveyed economists call for 3.3% y/y and 0.2% m/m increase. In both terms this is a downside against prior releases as they came out at 3.9% and 0.5% respectively. This print may spur increased volatility on the GBP tied FX pairs yet one should keep in mind that recent prints hit were in line with market consensus.

10:30 am BST - Eurozone Retail Sales for November. A semi-important data from the Eurozone. However, some investors may pay attention to this release as it is an important indicator of consumer spending that accounts for the significant part of the Eurozone economic activity. Market consensus calls for the 1.4% m/m and 2.2% y/y increase. This is especially interesting as the latest m/m print showed a 1.1% decrease. However one should keep in mind that December is usually a better month for the retail sales.link do file download link

EURGBP has been moving in consolidation ranging between 0.873 and 0.9 as of late. Source: xStation5

What to watch beyond today’s data?

US inflation data (Friday, 1:30pm GMT) - If there were doubts about a strength of the US economy they should have been well dismissed by a recent streak of data. Not only that but the economy is set to receive an additional boost from the fiscal stimulus. However, the US dollar has been unimpressed as its weakness towards the end of the year was stunning. There is one reason behind it: even though the economic momentum is there, traders are concerned it is not enough to produce higher inflation and they are betting against the Fed. Therefore, the US dollar is now fully relying on a recovery in inflation numbers. Affected markets: EURUSD, USDJPY.

ECB minutes (Thursday, 12:30pm GMT) - Yields of German bunds (BUND10Y on xStation platform) staged a recovery in December and helped the euro as some traders started speculations that very robust economic conditions will warrant termination of the QE program in September. From the ECB conference we only know that Mario Draghi will not be in a rush to make such declaration so traders will be looking into minutes to see what others at the Bank think. European equities start paying a lot of attention to the euro exchange rate as too rapid appreciation could be detrimental for profits. Affected markets: EURUSD, DE30.

Crude oil inventories (Wednesday, 3:30pm GMT) - An impressive rally on the oil market continued through December as some one-off events, mostly related to pipelines (in UK, US and Libya) disrupted supplies and pushed prices higher despite record high speculative positioning. January is a month of seasonal inventory increases in the US so traders will be looking for clues how tight the market is at present. Affected markets: OIL, OIL.WTI.

 

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