Markets are waiting inflation data in the US, UK and Germany
The focus of market participants will be focused on reports on inflation this week. They will be published in the United States, Britain and Germany. Information about the dynamics of consumer prices in the leading countries of the world is an indicator of the subsequent actions of central banks. Therefore, the expected last week volatility outbreaks may well continue in the coming days.
On Wednesday, the US Department of Commerce will publish an inflation report. It is expected that the base consumer price index in January was 1.7%. However, it can be assumed that the indicator will exceed forecasts given the significant growth in wages and a drop in stock indices. In this case, the probability of an increase in the FRS interest rate in March will increase. This may allow US dollar to strengthen in the major currency pairs.
The Bank of England will publish inflation data on Tuesday. At the last meeting, the regulator made it clear that he could continue to tighten monetary policy earlier than previously planned. This would happen if consumer prices remain above the target of 2%. Last month, inflation rose by 3.0%. If the situation repeats in January, this will strengthen the Bank of England's intention to raise the rate in the near future.
The dynamics of consumer prices in Germany shows the inflationary dynamics of the eurozone. So the publication of this indicator usually causes increased volatility in the foreign exchange market. The report on consumer prices in Germany will be published on Wednesday. It is expected that inflation in January will remain at the same level (1.6%). If the consumer price index exceeds forecasts, this may force the ECB to reconsider its plans to keep the QE program until the end of 2018. This would force him to begin tightening monetary policy faster.
In addition, this week a preliminary report on the growth of the Japanese economy in the fourth quarter is expected to publish. Also, the report on employment in Australia as well as data on retail sales in the UK will be published too.