The next seven days look set to be extremely quiet due to the shortened Christmas holiday week, with many markets closed on Monday and Tuesday. Japan and the United States will be the only major countries releasing data, though Australian private lending figures on Friday could also attract some attention. Volumes are expected to be thin as many traders will stay away from their desks and the year draws to a close. However, low volumes have a tendency to trigger erratic moves, while year-end flows could also drive forex markets.
Bank of Japan back in spotlight
The week will get off to a slow start with no major data expected on Monday, Christmas Day. But household spending, inflation and unemployment figures out of Japan should keep traders busy on Tuesday. Japan’s core CPI rate rose to a 2½-year high of 0.8% year-on-year in October and is forecast to stay unchanged in November. The unemployment rate is also expected to remain steady, at 2.8% for the same month.
More data will follow on Thursday with the release of industrial output and retail sales numbers. Industrial production is forecast to expand 0.5% month-on-month in November’s preliminary reading, unchanged from October’s rate. Japanese industrial output has gained and maintained momentum in 2017 on the back of a weaker yen and rising global demand. Domestic consumption has been lagging however, and annual growth in retail sales turned negative in October. A rebound to 1.2% is anticipated in November.
The Bank of Japan upgraded its assessment on industrial output and capital spending at its policy meeting this week but maintained its view on private consumption, saying it is "picking up moderately". Investors will get the chance to hear more from the Bank of Japan next week when it publishes its minutes of the October policy meeting (Tuesday) and the summary of opinions of the December meeting (Thursday). The summary of opinions will be the more interesting one, although few surprises are expected, especially after BoJ Governor Haruhiko Kuroda dismissed speculation of an early exit from its stimulus program in his press conference this week.
The yen is unlikely to see a significant reaction to the data but could be susceptible to year-end flows.
Housing and consumer confidence data to highlight US calendar
US economic indicators will not be sparse next week but will struggle to provide much direction to the lacklustre dollar, which failed to see a notable response even to the passing of the highly-anticipated tax reform bill. Traders will have to contend with housing and survey data to place their bets, starting with the S&P CoreLogic Case-Shiller 20-city home price index on Tuesday. Also on Tuesday is the Conference Board’s consumer confidence gauge. The index is forecast to ease to 128.4 in December from November’s 17-year high of 129.5. Other data will include the advanced goods trade balance and wholesale inventories for November, as well as the Chicago PMI for December, all due on Thursday.
With the tax cuts and the FOMC meeting out of the way, the dollar may extend its consolidation in the coming weeks. Investors’ main watch will be signs of faster wage and price growth as potential factors that could lead the Fed to project a more aggressive rate hike path for 2018.