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Forex Major Currencies Outlook (Feb 22 – Feb 26)

Second reading of US Q4 GDP along with PCE inflation data and RBNZ meeting will be the highlight news of the week while investors will be focused more on the US stimulus package. Stimulus is to be voted on in the House.


January retail sales came in at 5.3% m/m vs 1.1% m/m as was expected for a huge beat. Control group, the reading that is used for GDP calculation, came in at 6% m/m vs 1% m/m as expected. Electronics, home furniture stores and non-store retailers were the biggest contributors. The reading shows that stimulus cheques of $600 are producing results and have led to increases in consumption. The questions that arise now are the potential effect of the new $1400 stimulus cheques on inflation and if Congress will see the need to approve such a big stimulus. 

USD had a strong week as expectations surrounding the incoming inflation led to sell-off in Treasuries, which in turn propped the yield on 10Y US Treasury up to 1.30%. The yield is now close to the pre-pandemic yield. Rise in yields and consequently strong dollar lead to USDJPY over the 106 level and pushed gold below $1800. Commodity currencies, AUD, CAD and NZD, also suffered from the higher USD while EURUSD was pushed below the 1.21 level. As the week progressed the yields came down from the highs and the USD lost its gains. 

This week we will have second reading of Q4 GDP and PCE inflation data combined with spending data. 

Important news for USD: 


  • GDP


  • PCE
  • Personal Spending 


Second reading of EU Q4 GDP showed a slight improvement to -0.6% q/q and -5% y/y indicating that lockdowns in Q4 were not as detrimental to economic growth as the analysts and investors feared. February ZEW survey showed a negligent drop in current conditions but a huge jump in the expectations category for both Germany and EU (71.2 from 61.8 and 59.6 from 58.3 respectively). Expectations show overwhelming optimism about the future of the respective economies. 

Preliminary PMI data for February showed growing spread between the manufacturing and services sector. While manufacturing rose to three year high levels of 57.7, boosted by the strong export-driven demand and with German posting 60.6 reading, services continued to decline and came in at 44.7. Composite moved higher to 48.1 from 47.8 in January. After taking into the consideration both January and February PMIs we see Q1 GDP contracting. Markit noted that supply shortages are posing a concern as they lead to increase in raw material prices and consequently produce inflation pressures. 


Inflation in January rose by 0.7% y/y vs 0.6% y/y as expected on the back of rising energy prices. Core inflation remained the same at 1.4% y/y but it was expected to slide toward 1.3% y/y. Retail sales report for the same period was abysmal. Retail sales plunged -8.2% m/m and -5.9% y/y. Stricter lockdown and seasonal factors, such as usual drop after Christmas and New Year contributed to big declines. However, GBP was not phased by the reading as investors are pushing the GBP up on the back of no expectations for negative rates combined with vaccine optimism as PMI data rebounded. Services PMI came in at 49.7 from 39.5 in January. GBPUSD has breached the 1.40 level. 

This week we will have employment data. 

Important news for GBP: 


  • Claimant Count Change
  • Unemployment Rate 


Employment report for Australia in January showed employment change of 29.1k vs 30k as expected. The unemployment rate has slid to 6.4% from 6.6% in December but the participation rate slipped also to 66.1% from 66.2% the previous month. The big positive from the report is that full-time employment rose 59k indicating potential for a stronger rise in income. The part-time employment fell -29.8k. 

This week we will have CAPEX data for Q4 from Australia and official PMI data for February from China. 

Important news for AUD: 




  • Manufacturing PMI (China)
  • Non-Manufacturing PMI (China)
  • Composite PMI (China) 


Weekly economic update posted on February 19 by the New Zealand Treasury shows that New Zealand Activity Index continues to show modest growth. Activity was up 0.8% y/y in January. However, there are signs of recovery starting to plateau. 

This week we will have consumption data for Q4 as well as the RBNZ meeting. No changes in interest rate are expected. 

Important news for NZD: 


  • Retail Sales


  • RBNZ Interest Rate Decision 


Headline CPI in January rose to 1% y/y from 0.7% y/y in December of 2020. Rising gasoline prices had the biggest impact on the rise in inflation. Core measures paint a mixed picture with median dropping to 1.4% y/y from 1.8% y/y in December while trim rose to 1.8% y/y vs 1.6% y/y the previous month. 


Q4 GDP data surpassed expectations by coming at 3% q/q vs 2.4% q/q as expected. Private consumption came in at 2.2% q/q while business investment pleasantly surprised with a rise of 4.5% q/q after both Q2 and Q3 readings were negative. However, this is old news as we are already in the second half of Q1 for 2021. Additionally, GDP for 2020 contracted by -4.8%. 

Preliminary PMI data for February showed manufacturing improving to expansion level of 50.6 on the back of the strong external demand. Services slid to 45.8 due to the state of emergency being imposed across the country and composite improved to 47.6 from 47.1 in January. Inflation continues to go nowhere and give headache to the BOJ officials. Headline inflation came in at -0.6% y/y, same as ex fresh food, while ex fresh food and energy category climbed into positive with 0.1% y/y reading. 

This week we will have data regarding inflation for Tokyo area in February as well as consumption data. 

Important news for JPY: 


  • CPI
  • Retail Sales 


SNB total sight deposits for the week ending February 12 came in at CHF704.3bn, unchanged from the previous week. The SNB is standing on the sidelines, observing Swissy’s movements and ready to amp up deposits if the need arises.

You can follow all economic events on the Economic Calendar page on our Website. MT server time is set to GMT+2 and if you need assistance converting MT server time to your local time you can use some of the online time converters such as WorldTimeBuddy.

Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets. Please remember that our accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.

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