Previous week: 16 January 2017 – 20 January 2017
UK Prelim GDP q/q—Thursday 26th January 2017
UK 4th quarter 2016 GDP came in at +0.6% which was larger than +0.5% predicted. Q3 was revised upwards by a tenth from +0.5% to +0.6%. It seems like the consensus point of view that Brexit is very detrimental to the UK is unfounded and just a political talking point jawboned by the Stay campaign.
US Advanced GDP q/q—Friday 27th January 2017
US’s 4th quarter GDP came in at +1.9% which was an underperformance when juxtaposed against the consensus estimate of +2.1% and that of the previous quarter figure of +3.5% (upwardly revised from +2.9%). For the entire year, US GDP grew at a rate of +1.9% which is weak given that fact that it is supposed to be in the growth phase of the business cycle. Note that there was only 1 rate hike in 2016. If there were 4 which was previous predicted by the Fed, the growth rate would not be anywhere near +1.9%. The fact there was only one hike for the entire year is evident that the economy is fragile and nowhere near robust.
The Donald said in the campaign that the stock market was a bubble that was blown by Obama’s team. But now he has become President, he has pivoted his point of view. He now claims that the rally in stocks was because of the enthusiasm of him being elected President. He has now claimed responsibility of the stock market bubble and when it pops, he will not have the option of blaming it on Obama.
Coming week: 30 January – 03 February 2017 (Central Banks)
BOJ Policy Rate + BOJ Outlook Report + Monetary Policy Statement + BOJ Press Conference—Tuesday 31 January 2017
Inflation is the name of the game when talking about the Bank of Japan’s monetary policy stance. On Friday some CPI figures came out of Japan which are not too favourable. Japan’s inflation rate year on year for the month of December came in at +0.3% (previous +0.5%, consensus +0.2%). Core CPI y/y came in at -0.2% for December on expectation of -0.3% and November being -0.4%. It seems that the spike in inflation in November may just be an anomaly and not a fundamental shift in the trend.
The BOJ governor Kuroda said that he will do “whatever it takes” to boost inflation and reach the BOJ 2% inflation target. The last time the BOJ loosened its monetary policy was half a year ago in the on the 29th of July 2016. Will this meeting be the one that they BOJ loosen their monetary policy further? It may seem likely but we will never know what the BOJ will do because they tend not to give any hints/forward guidance on changes in their monetary policy.
Federal Funds Rate + FOMC Statement—Thursday 2nd February 2017 3am
Given the fact that the Fed had just raised their interest rate in December, it is highly unlikely that they will raise it again in this meeting. Also, the recent GDP figure came in at a lukewarm +1.9% and does not bode well for a hike in rates given the fact that the Fed is data dependent. The Fed seem to only make policy changes during meetings when they have a scheduled press conference. However they claimed that every meeting is a live meeting. The consensus is for no change in interest rate and that this meeting will be a non-event.
Bank of England Official Bank Rate + Monetary Policy Summary—Thursday 2nd February 2017
The Bank of England is expected to keep its monetary policy unchanged.
Non-Farm Employment Change + Unemployment Rate—Friday 3rd February 2017
Expectation is for 170K jobs created and for unemployment rate to remain unchanged at +4.7%.
On the weekly chart, USD/JPY had just established two bullish pinbars at a support zone at 113 to 114. Buying at around 113.50 with target set at 118 and stop loss 150 pips below entry price will give a reward to risk ratio of 3 to 1.
Silver seem to be consolidating at $17 resistance for the possible next leg up with a target at $18.50 an ounce. $16.75 on the daily chart seem to be where silver is taking good support from, especially when you consider Friday’s candlestick being pretty bullish.
When looking at the weekly chart, we see that the last weekly candlestick has a long lower wick which is a bullish pinbar taking support off $17. Next resistance if silver breaks $17 would be $18.50.
The counterargument would be that the weekly candlestick is in fact a hanging man and therefore a reversal signal back down to $16.