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What to watch for in the week ahead

The new trading year has officially begun and the market has madesome important moves. The US dollar struggled to gain further despite a streak of solid data. However, the next week will bring another flow of important figures that may support the USD. We will also learn if a recent drop in the yuan have had any impact on the Chinese economy.

Yellen’s speech (Friday, 10:30pm) and US data: PPI inflation, Retail Sales (Friday, 1:30pm)

The dollar weakened during the first week of trading despite hawkish FOMC minutes and solid economic data. An improvement in economic figures from all over the world may mean that the period of cheapmoney may be coming to an end and that led to a correction on the oversold crosses. Yet, the Federal Reserve is the only central bank to indicate that it wanted to raise rates in the near future. There is a Q&A session after the Yellen’s speech so one may expect heightened volatility on the FX market.  

Macro data from the United Kingdom: Industrial and Manufacturing Production (Wednesday, 9:30am)

The Bank of England delivered a significant easing program just after June’s Brexit vote. Soft indicators like the PMI and CBI deteriorated sharply and that forced the BoE to act straight away. However, in recent months that trend has reversed, with economic data beating expectations. Although it’s too early to discuss a potential tapering to QE or rate hikes, another streak of solid data may convince investors that the 2016 decline in the pound was too excessive. 

Macro data from China: CPI inflation (Tuesday) and Trade Balance (Friday)

Economic data from China in coming weeks is expected to show the world’s second largest economy carried solid momentum into 2017, thanks to heavy government stimulus and a construction boom that breathed new life into its industries. However, expectations for a further depreciation of the yuan are creating headaches for the government. The negative impact on economic data due to a stronger dollar is yet to be observed, but as history shows , the problem can suddenly flare up. 



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