Weekly Preview: CPI and a ‘Super Tuesday’ Conference to Spur Forex Markets
Rowan Crosby • 2 min read
Welcome to another trading week guys,
While last week was one of the quietest we’ve had in terms of newsflow, the good news is we are back with a bang. There’s a slew of big data out this week as well as a special ECB event that is going to get forex markets pretty excited.
On Tuesday the ECB is holding a Conference in Frankfurt. They have a panel discussion that will feature all the big names in Central Banking including the Fed’s Janet Yellen, the ECB's Mario Draghi, Bank of England boss Mark Carney and Bank of Japan Governor Haruhiko Kuroda
The talk is called, "At the heart of policy: challenges and opportunities of central bank communication", and is due to commence at 1000GMT (5AM ET).
The other key data that is bound to rock markets are the various CPI readings. We have inflation figures out of the US, the UK, the Eurozone and finally Canada. Many of these countries are either hiking rates or on the verge of hiking so if inflation is increasing then there’s more likelihood that those rate rises will continue.
Trump Tax Cuts
The big event in markets at the moment is also the Trump tax cuts. US President Donald Trump wants to reduce corporate tax rates to 20% from 35%. Both the House and Senate have weighed in, and it appears a number of Republicans want to delay the cuts until 2018.
That would make it after the midterm elections as the speculation is that the tax cuts might, in fact, hurt some of the Republicans getting reelected as they favour the wealthy.
How to Trade the USD
The majors all got pushed around by an up and down dollar last week. As the news was thin, there wasn’t really enough newsflow to push the USD through the major overhead resistance level. With US inflation being the headline act, we have a key driver that might just do the job for us.
If we get a strong reading out of the US, then interest rate rises in December, will nearly be a foregone conclusion. There is already a 90% chance the Fed will hike, however, that might just confirm it. A strong number will also mean there might be more in the offering.
US Dollar Index (DXY) – 240 min Chart.
Overall I’m bullish on the USD and if we see good inflation and progress with the Trump Tax plans then I see the USD breaking above 95.00 on the US Dollar Index and putting significant pressure on the majors.
Top Economic Data the Week
EUR – German GDP & ZEW Economic Sentiment
GBP – UK CPI
USD – PPI
JPY – GDP
USD – CPI & Retail Sales
GBP – Earnings & Claims
AUD – Employment
GBP – Retail Sales
EUR – CPI
USD – Philly Fed
USD – Building Permits
CAD – CPI