Forex fundamental analysis

A review of last week's important events 

The past week was quiet in terms of news data. Yet, the market paid special attention to three important data.

The first important data was the release of the non-manufacturing sector PMI index (ISM Institute report) on Monday which, unlike the forecasts, was higher than last time, which was 56.5, indicating the American economy is in a good state. That is why the dollar became strong in the market, and the stock market and gold began to decline. 

The second data was the United States' ordinary and core producer price index (PPI), released this month before the important US inflation data. It was mentioned last week that the ordinary and core producer price index (PPI) is a good guide for traders to predict the US inflation data. Contrary to the forecasts, these data had a significant increase, and the symbols related to the dollar had great movements. At the news release time, gold declined by $10, the Dow Jones stock index fell by 500 units, and the USDJPY symbol rose by 100 pips in the first few seconds. However, after a few hours passed and the news fix in the price chart, the movements returned a little due to the market's preparation for next week's data.

The third data was the University of Michigan report, which released good economic data and helped strengthen the US dollar.

The US good economic data and the increase in this country's producer cost index, which was expected by traders, gave the market the possibility that the Federal Reserve may not move strongly towards a dovish policy or a reduction in the interest rate hike. Therefore, the market tended to strengthen the US dollar. However, we should note that this data only slightly increases the likelihood of this view, and the dovish idea is still strong.

The economic calendar review from December 12 to 16

The upcoming week will be one of the most important economic weeks in 2022, so the financial markets can make great swing movements. In such conditions, capital management will play a key role in trades.This week's news, events, and economic data are very important due to the world's special economic conditions. The result of this event and data will determine the traders' path for the first quarter of 2023 to some extent.In this week's economic calendar, the most important event and data are related to the US dollar first, then the British pound, and the European euro. Also, there are some data for other currencies, which we will discuss below.

On Tuesday, December 13, at 01:30 PM, the US inflation indices for November, which are the monthly Core CPI (Prev: 0.3% | Forecast: 0.3%) and Consumer Price Index - annual CPI (Prev: 7.7% | Forecast: 7.3%) and Consumer Price Index - monthly CPI (Prev: 0.4% | Prev Nose: 0.3%.) will publish. These inflation data are important because the Federal Reserve's policies' basis is to control inflation and the economy's stability.

After the US inflation data release last month and the inflation reduction from its peak, traders concluded that inflation will probably continue to decrease. Therefore, the US Federal Reserve should reduce the hawkish policy and start the dovish policy. They should increase the interest rate slowly and reduce the final interest rate, this way US dollar value will experience a further decrease.

The US dollar value can still decrease if the inflation data is lower than expected, and it can move up or down at the time of data release if it is as expected. But we should note that traders have included this expected inflation decrease in their trades. The dollar weakness during this period is due to these forecasts of the inflation rate decrease. They say that the market predicted the data, and assets are included in the prices.

However, if inflation data increases, the US dollar will strengthen, and the circumstances will be different. The assets related to the dollar, such as gold, stock market indices, and the main currency pairs, will perform good moves.
The inflation data will be significant because it will directly affect the Federal Reserve's interest rate meeting on Wednesday. Therefore, after the data release, traders will start predicting this meeting according to their analysis.

Wednesday, December 14, is a fateful day for the US dollar. Based on the forecasts, on this day at 07 PM, the US Federal Reserve interest rate will increase by 0.5% from 4.00% to 4.5%. Also, with the interest rate decision, the statement and report of the US Federal Reserve Committee's economic estimates will be published, which has significant points. Symbols related to the US dollar can fluctuate significantly.

There will be a press conference of the Federal Reserve Committee at 07:30 PM on Wednesday. Mr. Powell, head of the US Federal Reserve's speech, and the journalists' query will be significant and have key points that can determine the market's general direction. And great moves can be seen in metals, stock market indices, stocks, energy, and currency pairs related to the dollar and even cryptocurrency. Note that due to the Federal Reserve being data-driven, the inflation rate on Tuesday can be very influential in the decisions of this institution.

Other significant data related to the US dollar, which is the Core Retail sales index (Previously: 1.3% | Forecast: 0.2%) and the Retail sales index (Prev: 1.3% | Forecast: - 0.1%), will publish this week on Thursday, December 15, at 01:30 PM for November. Also, on Friday at 02:45 PM, the Flash Services and Manufacturing PMI report for December will be published, which is of great importance for the dollar.

This week some important data such as the inflation and the interest rate will be decided and published for the British pound, which can influence it and determine the direction of this currency.

On Wednesday, traders will be interested in the UK inflation data because, at 07 AM, the annual consumer price index (CPI) for November (previously: 11.1% | forecast: 10.9%) will publish. Considering that the inflation in England is high, if it increases, England can be closer to an Inflationary recession.However, the most important weekly event of the pound will be related to deciding the country's interest rate, which is expected to increase by 0.5% from 3% to 3.5%. Another important weekly event of the pound is the Central Bank of England's monetary policy statement.It is worth mentioning that deciding the interest rate and Central Bank's monetary policy statement will publish at 11 AM on Wednesday.

On Friday at 07 AM, the monthly and annual retail sales index for November and the PMI index and report at 9:30 AM will be published.

The central bank's interest rate for the Australian dollar will be set on Tuesday at 3:30 am. It is expected that the central bank of Australia will increase the interest rate of this country by 0.25% from 2.85% to 3.10%. This central bank's statement will publish at the same time, which can have important points about Australian monetary policies and bring good fluctuations to the currency pairs with the Australian dollar on one side. Also, at 12:30 am on Wednesday, the Gross Domestic Product (GDP) for the third quarter will be published.

For the eurozone, at 01:15 PM on Thursday, the European Central Bank's interest rate, which is expected to increase by 0.5% from 2% to 2.5%, and the monetary policy statement will be published. The European Central Bank's press conference will be held at 01:45 PM. On Friday, the PMI report of Eurozone countries will release as well.

For the Swiss franc, the country's central bank will publish the monetary policy statement and the interest rate, which is expected to increase by 0.5% from 0.5% to 1%, at 08:30 AM, on Thursday. And the Swiss Central Bank's press conference will be held at 09 AM.
These events are important for currency pairs related to the Swiss Franc.

At 12:30 AM, the Australian employment changes and the unemployment rate for November will be published, which can affect the Australian dollar.