Brexit might be the favourite child of the media these days, but there’s plenty more on the horizon that could cause significant volatility for the currency markets in 2018. So, what catalysts for exchange rate shifts should you be aware of?
- German growth expected to have impressed in 2017
- Eurozone factory output forecast to jump
- US PPI figures predicted to slide
The euro is expected to jump later this morning as Germany publishes its first estimate for domestic GDP in 2017.
Economists forecast that the GDP data will show year-on-year growth in Germany rocketed up from 1.9% to 2.4% over the course of 2017.
This will be the fastest pace of growth since before the Eurozone debt crisis and will put GDP growth ahead of its long-term average of 2%.
The final piece of economic data released by Germany ahead of the GDP figures revealed industrial production grew at a blistering pace in November. If this proves to be any indication of the nation’s performance in 2017 it points towards the possibility of growth surging even higher.
Given Germany’s position as the economic powerhouse of Europe, any jump in growth is likely to reflect well on the overall reading from the Eurozone when it is released later this month.
Analysts predict Eurozone factory production will climb
The euro is also likely to be lifted by the release of the Eurozone’s latest industrial production figures this morning as analysts predict factory output will have risen from 0.2% to 0.8% in November.
Again, given Germany’s spectacular production figures published earlier in the week, there is a very real chance the Eurozone reading will be notably higher than currently forecast, increasing the chances of some solid gains for EUR this morning.
However, annualised production figures are expected to show that year-on-year output will have slumped from 3.7% to 3%, potentially putting a dampener on the figures.
US PPI forecast to dip
The US dollar, meanwhile may find itself beating a retreat again on Thursday with the publication of the latest Producer Price Index (PPI) figures.
Analysts predict that while producer prices will have continued to rise last month, the index will show that price growth in the US slowed from 0.4% to 0.2% in December.
The dip in producer prices may also be an indicator that price pressures across the US remained subdued last month, likely leading to another weak inflation reading tomorrow.
With policy makers at the Federal Reserve becoming increasingly wary about the stubbornly low US inflation rate, USD’s losses could be magnified if investors fear the PPI figures will re-enforce calls for the bank to adopt a more gradual pace of monetary tightening in 2018.
Thursday, 11 January, 2018
09:00 EUR German GDP
10:00 EUR Industrial Production
13:30 USD PPI
Joining the corporate trading desk in 2007, Phil now overseas all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FSA approval and has completed the Certificate in International Treasury Management (CertiTM)