Economic Analysis

This week, many important economic events awaited. We highlight below the most important of these events:

US Durable Goods Orders: Tuesday, 16:30. Durable goods orders represent the investment that the Fed closely monitors. Moreover, the data serve as preparation for later growth figures. After both major and core orders declined in November, both are expected to advance in December, as economists expect a 1.2% increase in core stats and 0.4% in the base.

Consumer Confidence: Tuesday, 18:00. The Conference Board Consumer Confidence Index was out of the highest levels but still shows high levels of confidence, which reflects strong spending. After recording 126.5 points in December, it is expected to rise to 128.2 for the month of January.

Australian Consumer Price Index: Wednesday, 3:30. The core CPI holds expectations for an acceleration from 0.5% to 0.6% in the fourth quarter of 2019 while the core index is expected to repeat the 0.4% increase seen in the third quarter. Following recent strong job statistics, the Reserve Bank of Australia is likely to keep interest rates unchanged.

Federal Reserve Decision: Wednesday, 22:00, press conference at 22:30. After three consecutive rate cuts, the world's most powerful central bank has indicated that it will take a long time. Since then, officials have repeated this message that interest rates are "appropriate." However, investors will examine every word in the attached price statement and this comes from Jerome Powell, Chairman of the Federal Reserve. In the previous decision, Powell reiterated its position that the barrier to raising rates is too high to reduce them. Markets will be watching its speeches on the subject as well as on the recent modest job report, good growth rates and low trade tensions between China and the United States. An upbeat tone can lift the dollar, while an upbeat tone can depress it.

UK Interest Rate Decision: Thursday, 15:00, press conference at 15:30. The pessimistic statements and comments of the BoE members gave the idea that the rate cut could not be stopped. However, the upbeat jobs report and bullish PMIs came in, and now bond markets see prospects of a 50-50 cut. Aside from this January decision, Pound traders will also notice hints on the next steps. Given the high uncertainty, volatility is set to be intense, for Governor Mark Carney before he transfers the baton to his successor Andrew Bailey. This pushes the dial closer to the cut, saving that dilemma from Billy. However, anything can happen.

American GDP: Thursday, 16:30. The first release of GDP numbers tends to have a stronger reaction than the second and last publications. The US economy grew at a moderate rate of 2.1% in the third quarter and economists expect a marginally faster clip of 2.2% in the fourth quarter of 2019. A decrease of less than 2% could affect the dollar while a rise of around 2.5% would drive it higher . Regardless of the key number, markets will want to know if the investment has recovered or if the consumer continues to carry the economy on its own. The Fed may receive data in advance and hint at it at its meeting.

Eurozone inflation: Friday, 13:00. Christine Lagarde, President of the European Central Bank, expressed cautious optimism about rising inflation, with core and core inflation reaching 1.3% in December. January's first release of CPI numbers is set to show a divergence, with headline prices rising 1.4% annually while the core CPI falling to 1.2%. If core inflation shows an increase, this will be the highest since 2013. However, opportunities are slim as this will stunt growth.

Canadian GDP: Friday, 16:30. Canada publishes growth numbers once a month, and the next issue in November. GDP numbers were disappointing in October due to the 0.1% pressure and one of the reasons the Bank of Canada was to open the door to lower interest rates. Return to growth is possible in the next release.

All times are KSA