Your weekly fundamental view (Oct 24-28)

October 24, 2016 15:24

Need to know

This week is pretty weak on fundamental events. Still, the main focus is on the release of US Advance GDP. GDP growth rate is the earliest GDP report and can have the most impact on the market. Other important events that traders should be paying attention to are listed below.

Coming up

EUR German Ifo Business climate is released on Tuesday, 25 October. Large sample size and historic correlation with German and Eurozone economic conditions make this report very important for EUR zone and currency. EUR currency basket usually moves with the release of the report. Why should traders care? Any change to market conditions might be an early signal of any future economic activity such as spending or investment.

BOE Governor Carney testimonial on Tuesday, 25 October. BOE Governor Mark Carney is due to testify about the economic consequences of the Brexit vote. Why should traders care? The head of the central bank tends to have the most influence over nation's currency movement. Traders should be paying attention to this testimonial. If the governor is hawkish, it should be supportive for GBP and vice versa if Mr Carney testimonial turns to be dovish.

AUD CPI comes on Wednesday, 26 October. This report measures the overall change in the price of goods and services purchased by consumers. Why should traders care? If the actual result comes out greater than the forecast, it should be good for currency and vice versa. Traders might trade this news in the form of spike trading.

Crude oil inventories will be released on Wednesday, 26 October. A build-up in crude oil inventories usually signals decreasing demand from refiners. On the other hand, a drop would signal that refiners are still producing at elevated levels and the inventory overhang in oil products could continue. This is primarily a US indicator, but it also affects CAD due to Canada's huge energy sector. Previous data showed a 5.2m barrels decrease. Why should traders care? The price of petroleum products influences inflation, which impacts oil-dependent industries.

GBP preliminary GDP report is released on Thursday, 27 October. This is the first post Brexit GDP data for the UK. It measures the change in the inflation adjusted value of all goods and services. If the actual results comes better than expected we think it will be good for currency and vice versa if the actual result comes lower than the forecast. Why should traders care? The data will be of more importance than usual as they are accounting the first three months following the Brexit referendum on June 23.

US unemployment claims are released on Thursday, 27 October. These claims are the earliest national economic data, representing the number of individuals who filed for insurance for the first time during the past week. If the actual result is weaker than the forecast, it could be deemed good for the currency. Why should traders care? The number of unemployed people is an important signal of the overall economic health and could hint at the future monetary policy steps.

JPY Inflation Rate will be released on Friday, 28 October. The forecast for this report is the same as the previous month result -0.5 %. The deflation in Japan only increases the speculation that 2% target is not going to be hit anytime soon. Why should traders care? Inflation is important to currency valuation because rising prices may lead the central bank to tighten monetary policy.

US Advance GDP comes out on Friday, 28 October. The preliminary third quarter GDP data is the main focus this week. Economists are predicting a substantial rebound from the second quarter's 1.4% annualised rate to 2.5% in the third quarter. Why should traders care? GDP is a primary gauge of the economy's health. The Advance is the earliest release and tends to have the strongest impact. The image shows Advance GDP during the course of last 5 years.