Economic Calendar

The Forex market is traded 24/7 and is primarily driven by economic news and data. If you're trading Forex, having an up-to-date Economic calendar is a must. The Economic calendar will help you prepare for minor to major news events and control risk in your Forex trading.

Among the major economic news data in the U.S. Economic Calendar that we will discuss below is the FED interest rate decision slated for release on 14th December and the Consumer Price Index(cpi) and Retail sales Report slated for release early next year.

On 14th December the FOMC will hold its final meeting of the year. The committee is expected to raise its target range for Fed Funds by 25bps-50 bps to 4.25%-4.5% after agreeing to raise its target range for the federal funds rate by 75 bps to 3.75%-4% during its November meeting marking the sixth consecutive rate hike and the fourth straight three-quarter point increase, pushing borrowing costs to a new high since 2008. That said, CME's Fed watch tool is now pricing in an 80.6% probability of the FED raising its interest rates by 25-50 bps to 4.25%-4.50% in the minutes of the FOMC set to be released on 14th December. 

The recent data released by the U.S. Bureau of Statistics showed moderating inflation, signalling that inflation could be slowing in the U.S. The U.S.'s annual inflation rate(measured by Consumer Price Index(CPI)) slowed for a fourth month to 7.7% in October of 2022, the lowest since January, and below market forecasts of 8%. In comparison, The Producer Price Index (PPI)for final demand in the U.S. rose 0.2% month-over-month in October of 2022, the same as a downwardly revised 0.2% increase in September and below market forecasts of 0.4%.

That said, the two inflation data reports may be what the Fed has been waiting for before deciding to slow down its rate hikes, more so the Fed indicated during its November meeting that it might slow the pace at which it raises interest rates in December. The two reports would be crucial to the decision the FOMC will make concerning the rate of its target range for Fed Funds.

The FOMC is also expected in its final meeting to provide a detailed report on the economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under their assumptions of projected appropriate monetary policy for December 2022.

‼ Impact the FOMC Interest Rate Decision will have on the economy 

The FOMC Interest Rate Decision will have a huge impact on the economy and its people, and we will look at some ways the decision will impact the economy.

📌 Stocks and Bonds

When interest rates go up due to the FOMC Interest rate decision, it becomes more expensive for businesses to borrow money. That can hurt future growth and weigh on a company's stock performance. The whole market can sink if enough companies see their stock prices go down. And as rates go up, risky stocks can seem less attractive because investors can make more money in safer assets than with low-interest rates.

📌 Mortgage Rates

The Fed's rate hikes are quickly absorbed into the housing market because they send mortgage rates way up. In late March, the average rate for a 30-year fixed mortgage, the most popular home loan in the United States, was below 4 percent. In late October, it topped 7 percent.

And already, buyers are bowing out of the market, more homes are available for sale, and prices are starting to ease. But the higher loan rates mean many people — especially first-time buyers who don't have equity to tap for purchases — still can't afford to buy homes, further crowding the rental market.

📌 Corporate Profits

Higher interest rates make routine business more expensive for firms that rely on lines of credit or loans. Raising capital also becomes harder when interest rates go up. That can hold back expectations for earnings and future growth or make investors lose confidence that a company can weather economic stress.

Slimmer profit margins — or no profits — might push a company to evaluate its budget, possibly minimizing staff, cutting back on inventory or shuttering whole departments.

Instruments that will be volatile during the Fed Interest Rate Decision Announcement

The Most Notable instrument that will be volatile during the Fed Interest Rate Decision announcement is the USD and the Stock index. Still, depending on the FOMC decision, two outcomes are likely to emerge:

• If the actual number is higher than the last or forecasted number (Fed rate hike). Typically, the U.S. dollar will rise sharply on this occasion and commodities linked to the U.S. dollar will depreciate sharply also. - depending on what has already been anticipated by the market.
• Stock indexes' value would rise sharply along with an increase in the value of the U.S. dollar. (Strong U.S. dollar)
• If the actual number is lower than the previous or forecasted number ( Fed rate cut), In this situation, the U.S. dollar will typically fall sharply, causing a spike, and commodities linked to the U.S. dollar will appreciate sharply. - again, depending on what has already been anticipated by the market. 
• Stock indexes' value would depreciate sharply along with a decrease in the value of the U.S. dollar.

The U.S. Bureau of labour statistics will announce on 12th January the Consumer Price Index(CPI) report, which according to Different agencies' predictions on the US CPI data differ, putting US CPI inflation within the range of 7.0% to 8.1% percent in 2022 and around 2.8-3.5% in 2023. All agencies predicted that CPI inflation in 2023 will be 0.8-1.5% higher than the Federal Reserve target of 2%. By 2025, CPI inflation in the U.S. is expected to return to 2%.

The consumer price index rose less than expected in October, indicating that while inflation is still a threat to the U.S. economy, pressures could start to cool.

Excluding volatile food and energy costs, so-called core CPI increased 0.3% for the month and 6.3% annually, compared with respective estimates of 0.5% and 6.5%, according to a Bureau of Labor Statistics release. 

‼ Impact the U.S. Core CPI Data Release will have on the economy

Although regular inflation—the increase of all items, including food and energy products—could undoubtedly impact your day-to-day life by forcing you to tighten your budget, core inflation is the preferred indicator of inflation to the Federal Reserve. This means that if the core inflation rate gets (and stays) too high, the Board of Governors of the Federal Reserve System will likely raise the federal funds rate, thereby increasing interest rates on mortgages, credit cards, and other consumer lending products.

In other words, when the core inflation rate is elevated, consumer items like housing, transportation, and clothing will be more expensive, and so will the cost of borrowing money to purchase those items.

Instruments that will be volatile during the Core CPI Data Release 

A reading above the market expectations, for instance, would strengthen the U.S. Dollar, uplifting the U.S. Treasury bond yields and finally drag lower the $EUR/USD pair. Conversely, a reading below market expectations would have the opposite effect and uplift the $EUR/USD and cause it to trade higher...a reading that matches the market expectations wouldn't have a substantial impact on the market.

The U.S. Census Bureau is expected to announce estimates for retail sales for December 2022 in January next year, and according to trading economics, In the long-term, U.S. Retail Sales are projected to trend around 1.00 percent in 2023 and 0.40 percent in 2024, according to their econometric models.

According to government figures released recently on Wednesday, consumer spending was slightly higher in October as prices increased sharply and the Federal Reserve implemented higher interest rates to slow the economy.

Retail sales in the U.S. surged 1.3% month-over-month in October of 2022, the strongest increase eight months after a flat reading in September and beating market forecasts of a 1% gain. Sales at motor vehicle dealers were up 1.3% as supply chain constraints have been easing, while rising gasoline costs pushed sales at gasoline stations 4.1% higher.

‼ Impact the Retail Sales(MOM)Data Release will have on the economy 

Among all sales forms, retail has the most direct impact on the economy. Market analysts track consumer spending, especially the sale of finished consumer goods and sales generation of flagship stores. Consumer spending levels shape market expectations.

Consumer spending habits evolve, shaped by various factors, such as festivals, holiday sales, product lifetime value, generational preferences, technological advances, and more. It also depends on the unemployment rate and the overall consumer confidence in the economy. External conditions often influence short-term consumer spending behaviour, which affects the economy and forex prices. For instance, retail spending witnessed a sharp decline during the start of the COVID-19 pandemic.

Instruments that will be volatile during the Retail Sales(MOM)Data Release 

Due to increased consumer spending, retail sales growth indicates healthy consumer fundamentals. Retail makes up about half of the personal consumption and about 70 percent of the GDP.

The retail figures show if the economy is expanding or contracting. A fall in sales means a contracting economy, and a growth in sales means a booming economy.

The percentage of increase or decrease reveals if the economy is expanding or contracting. The currency is pegged to the healthy economy when trading in currency pairs. In this case, the U.S. Dollar will rise if the data beats market expectations. Conversely, the currency pegged to the declining retail consumer prices, in this case, the U.S. Dollar, will fall if the data comes in below market expectations.

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