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Could data determine the direction of the USD in the first week of 2016

Firstly happy new year to everybody and all the best for 2016. Reviewing 2015, it really was the year of the US Dollar as they became the first major nation to raise interest in almost a decade. The big question is now when can they raise interest rates again. Already we have seen Yellen’s number two express his views. Federal Reserve Vice Chairman Stanley Fischer said it might be necessary for the central bank to increase interest rates if financial markets were overheating. This is conflicting with other voting members views which shows how fragile this could be. Meanwhile, big question marks remain over when the UK could raise interest rates. At one point in 2015 it was believed that the UK could actually beat the US to the punch, but amidst a decline in momentum in the economy and potential EU referendum, this has been pushed back to Q4 2016 and some even believe 2017. The Eurozone will remain under scrutiny as it continues it QE programme, if we see this expanded further then the single currency could come under further pressure.

2016 starts with a very busy week which could set the tone for US Dollar performance. 

Monday 4th January 2016

  • UK Manufacturing
  • UK Net Lending to individuals
  • US ISM Manufacturing

Liquidity will start to return to the market today which could make some reaction to economic data slightly more lacklustre as investors try to find their feet. Manufacturing data is due for release on both sides of the ponds. 

Tuesday 5th January 2016

  • Spanish/German Unemployment
  • UK PMI Construction
  • EZ Inflation

The quietest day of the week in terms of data although it will create plenty of newswires. Inflation from the Eurozone will be watched as lower commodity prices continue their trend. Unemployment readings from Spain and Germany will keep the market interested.

Wednesday 6th January 2016

  • UK Final Reading GDP 
  • UK PMI Services
  • US ADP Employment
  • US Trade Balance
  • US ISM Non-Manufacturing
  • US FOMC Meeting Minutes

Busy day ahead with the main focus on the FOMC minutes which are released after the European markets close. The minutes will be deciphered for clues on when rates could go up again in the US. Other key data include the UK PMI Service reading which is the dominant sector in the UK (roughly 75% of economic activity). The ADP unemployment report will give the market an early indication of how the all-important US employment data could look on Friday.

Thursday 7th January 2016

  • German Retail Sales
  • EZ Unemployment
  • US Jobless Claims

The market is likely to take its time to decipher the minutes from the previous evening to try and ascertain when the next increase in rates will be scheduled for in 2016. Meanwhile, data is fairly second tier with the focus on the Eurozone. German retail sales and Eurozone unemployment are set for release as is the weekly US jobless claims.

Friday 8th January 2016

  • US Non-Farm Payrolls
  • US Unemployment Rate
  • US Average Earnings

Dominating the docket today will be the all important employment data from the US. This could set the tone for price action for the remainder of the month. A good figure will spark speculation of an early rate hike in the US whilst a poor number could taper hopes.