CPI, GDP and unemployment - the main drivers of the markets next week

Inflation indicators will be of major importance for global financial markets next week, with the US, UK and Germany publishing CPI data in January.

Japan will release preliminary data on economic growth in the fourth quarter of 2017, and traders will look for additional signs of the power of the economy that would force Bank Of Japan to start withdrawing incentives. A large number of investors are expecting this moment, but it is unlikely to come soon, given the fact that BOJ has announced it will buy bills as much as possible.

Meanwhile, Australia will publish the employment report, which will be closely monitored by investors looking for additional signs of boosting wage growth and inflation.

Here are the five top events that will have a direct impact on the markets

1. US CPI inflation data will be released on Wednesday at 15:30, with market analysts expecting a 0.3% rise in consumer prices, which is faster than the 0.1% increase in December. The forecast for inflation is to rise by 0.2%, which is slower than in December, when consumer prices peaked for 11 months.

An increase in inflation will have a strong positive impact on the dollar, as the level of the indicator will move closer to the FED target of 2%. The steady inflation in recent months and the strong economic growth in the US are an indisputable fact and according to market participants, the Fed does not reflect this and raise interest rates as expected or more. Currently, the only worry on the market is the stock market correction, which, if deepened, will most likely cause the members of the monetary policy committee to reflect on. Despite the sharp downturn, however, many market analysts and investors are of the opinion that there is a solid foundation behind the stock, and the current adjustment is just a "breath of air."

With better forecasts for inflation, we expect a strong dollar over the week, and worse, the value of the greenback will remain.

2. UK consumer prices - we expect the island's inflation data on Tuesday at 11:30 and analysts expect the annual consumer price index to fall to 2.9% versus 3.0% in December. Basic inflation is expected to grow slightly from 2.5% to 2.6%.

In addition to the inflation report, traders will focus on monthly retail sales data and will look for further insights into how Brexit has an impact on the British economy.

We are also waiting for news of the Brexit talks, which would have an impact on the bottom line, and hence on the GBP. Over the past week, the GBP saw a downward trend against major currencies, and if the data is worse this week, the downward trend will remain in place. However, the pound needs correction and the long-term upward trend remains in place. A GBP decrease will provide us with a good opportunity to position Long positions at a better price.

3. Germany's CPI - Germany will release inflation data in the country on Wednesday at 09:00. The report is expected to confirm that consumer prices in the largest economy in the region have risen 1.6% last month. Data is often seen as a barometer of how prices are developing in the euro area and have a strong impact on the euro.

The individual GDP reports of Germany, Italy and the Netherlands will add extra evidence to the economy in the region.

The ECB last month said it would keep its $ 2.5 trillion stimulus program. for as long as necessary, and said he had "very little chance" to change interest rates this year. Despite these remarks, market participants remain convinced that the easy monetary policy in the region will soon be in the history. Investors remain positive about the European economy, and facts and rumors prefer purchases of EUR.

4. Preliminary GDP for Japan for the fourth quarter

Japan will release preliminary data on economic growth in the fourth quarter at 1:50 am Wednesday.

The report is expected to reveal that the Japanese economy has increased by 0.2% in the last three months of the year, compared with a 0.6% growth in the previous quarter. The economy is expected to grow at an annual rate of 0.9%, resulting in a sharp slowdown in growth of 2.5% in the third quarter. Recently, there have been some signs that the Japanese Central Bank has begun discussions to remove its quantitative easing program, triggering speculation that it will follow the Fed and the ECB and start normalizing politics earlier than expected. This is no longer the case, and has a negative impact on JPY after BoJ decided to buy state bonds indefinitely.

5. Employment report from Australia - Consensus forecast is that new jobs will be 9,000 in number after an increase of 34,000 in December. Unemployment is expected to drop to 5.4% from 5.5% in December. Given mixed business data, the instructors will be cautious with AUD, and we expect them to step up in a given direction only after clear data on whether the labor market is improving or worsens.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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