Yellen’s Testimony Highly Awaited, Data on CPI, Retail Sales Under The Spotlight
U.S. stocks were higher after the close on Friday. At the close in NYSE, the Dow Jones Industrial Average added 0.48% to hit a new all-time high, the S&P 500 index gained 0.36%, while the NASDAQ Composite index added 0.33%.
The U.S. dollar also finished the week higher versus all of its peers. The dollar index, which the greenback’s strength against a trade-weighted basket of six major currencies reached the eleven-day highs of 101.02 in early Friday before retreating to close at 100.71. For the week, the index gained 0.95% – the largest weekly percentage gain since mid-December. The rally came after Trump said Thursday he would be announcing something over the next two or three weeks that would be “phenomenal” in terms of tax.
According to data released by the University of Michigan on Friday, U.S. consumer sentiment eased back to 95.7 from a reading of 98.5 in January, which was the highest since January 2004.
In the week ahead, Federal Reserve Chair Janet Yellen’s semi-annual monetary policy testimony on the economy before Senate and House committees in Washington DC will properly be the most important event risk on the calendar for the greenback. Fed President Yellen is scheduled to testify on the economy before the Senate Banking Committee on Tuesday and before the House Financial Services Committee on Wednesday.
Her comments will be monitored closely for any new insight on policy and the timing of when it might raise interest rates. Fed fund futures are pricing in a less than 15% chance of a rate hike in March, but odds of a June increase was seen at more than 65%. The U.S. central bank has previously projected three rate increases this year, however, traders have priced in just two rate hikes during the course of this year.
Besides remarks by Yellen, markets will also awaiting economic data from the U.S. On Wednesday, the Commerce Department is to publish inflation figures for January. While consumer prices were expected to consumer prices, core inflation is forecast to increase 0.2% which would send core CPI index 2.1% higher on a yearly base if confirmed.
The Commerce Department on Wednesday will also publish data on January retail sales which are expected to rise 0.1% last month, after gaining 0.6% in December. Core sales are forecast to inch up 0.4%, after rising 0.2% a month earlier.
Other U.S. data including producer prices, industrial production, building permits, housing starts, initial jobless claims will also draw market attention besides headlines from Washington which may feature further details on President Donald Trump’s pledge of tax reform, infrastructure spending and deregulation as well as trade policies.
Next week will be quiet for the Japanese Yen as there will be no meaningful data on the nation economy except for preliminary fourth-quarter economic growth data due on early Monday. The report is expected to show Japan’s economy expanded by just 0.3% in the final three months of 2016, maintaining pressure on policymakers to support the world’s third largest economy.
The Canadian dollar ended the week higher against the greenback thanks to better-than-expected data. The pair USD/CAD was down 0.46% at 1.3084 following the release of upbeat Canadian employment data which showed both full-time and part-time work increased and unemployment rate declined to 6.8%.
For the British Pound, which was little changed, with GBP/USD at 1.2490 last week, the U.K. Office for National Statistics will release data on consumer price inflation for January on Tuesday, before it publishes the monthly jobs report on Wednesday. While analysts expect consumer prices to rise 1.9%, they forecast the claimant count change to add 1,000 in January, with the jobless rate holding steady at 4.8%. Wage growth including bonuses is forecast to rise 2.8%.
To wrap up an eventful week for the Pound, the ONS on Friday will produce a report on January retail sales with analysts expecting an increase of 1.0%, following a drop of 1.9% in the preceding month.
The euro was lower against the dollar late Friday, with EUR/USD sliding 0.18% to 1.0640, not far from a three-week trough of 1.0608 set ahead of the Trump-Abe press conference. For the week ahead, Germany, the euro zone’s largest economy, will publish a preliminary report on fourth-quarter economic on Tuesday. The headline reading is forecast to expand 0.5% in the October-December period, compared to growth of 0.2% in the preceding quarter.
On the same day, the euro zone will release revised fourth-quarter growth data after an initial estimate published late last month had shown the region’s economy grew 0.5% in the three months ended December 31, accelerating from growth of 0.4% in the third quarter.