Sep 24 – 28: Forex Week Ahead – FOMC, RBNZ & GDP Figures In The Limelight
Arslan Butt • 4 min read
What’s up, traders.
It was a slow week as the markets exhibited thin volatility in the absence of major economic events. During the previous week, the Greenback struggled near $93.829 lows, while the Yen also weakened on Friday on diminished safe-haven appeal. Investors switched their sentiments that the Sino-U.S. trade conflict would not lead to an instant global trauma.
Most of the traders felt hesitant to get in swing trades ahead of the Federal Funds Rate which is due in the coming week. The upcoming week is also packed with few high impact economic events, including Fed Rate Decision, RBA Rate Statement, ECB President Draghi and many more macroeconomic events. Here’s what to expect from them…
Watchlist – Top Economic Events This Week
Monday – Sept 24
On Monday, the Japnese and Chinese banks will be closed in observance of Autumnal Equinox Day and the Mid-Autumn Festival. Most Forex brokers remain open for every holiday except Christmas and New Year’s Day. But the volatility often remains extremely thin.
EUR – ECB President Draghi Speaks
At 13:00 (GMT), President Draghi is due to testify about the economy and monetary policy before the European Parliament Economic and Monetary Affairs Committee, in Brussels. As we know, Draghi isn’t expected to play with interest rates until 2019. Therefore, this speech may leave a muted impact until and unless ECB’s President surprises the investors with something new.
Tuesday – Sept 25
USD – CB Consumer Confidence
For all the newbies, consumer confidence is a survey of about 5K households which asks respondents to rate the relative level of current and future economic conditions including labor availability, business conditions, and overall economic situation. Back in August, the consumer confidence hit the mark of 133.4 and the figure of 132.2 is on the cards now.
Let me add that the consumer confidence is positively correlated with the consumer spending and ultimately with inflation. The more you are confident about your economy, the higher you will spend and that will result in a higher level of inflation. So, it’s considered good for currency.
NZD – Trade Balance
Trade Balance is a difference in value between imported and exported goods and services during the reported month. The New Zealand economy is also an export-oriented and most of it’s living from the foreign exchange. Most of their income comes from exports. New Zealand’s trade balance is likely to show a deficit of -930M vs. -143M previously.
Wednesday – Sept 26
USD – FED Monetary Policy Meeting
On Wednesday, Federal Reserve, the central bank of the United States, takes the spotlight as it is expected to release the interest rate decision. Investors are widely expecting it to result in another rate hike, the third of the year.
Fed Chair Jerome Powell has made it obvious he believes the Fed should continue steadily increasing borrowing costs, and the futures market seems to buy what he’s selling.
Fed Rate Hike – Is It Priced In?
We all know about the Fed’s plan to hike the interest rates in September and December. The investors have already placed their positions to secure the maximum returns in the dollar. So, what to expect on the rate hike?
In my opinion, the rate hike of 2.25% is already factored in. The initial response is likely to be a spike in the dollar and then a sudden reversal. As a second thought, we may see a muted response in the 2.25% release.
However, it’s gonna be an amazing trade if Fed hikes the interest rate by 50 base points to 2.50% or doesn’t hike the rate and keep it as it is. But the odds are extremely low for this scenario.
Later, the investors will focus on the post-meeting release and Powell ’s press conference which is due at 19:30 (GMT), 30 mins after the Fed Fund Rate. Traders are expected to be on the edge of their seats waiting to listen to Powell’s opinions on inflation and wage growth. So, I will also be looking for clues about the next rate hikes, especially what they are planning for 2019.
NZD – RBNZ Monetary Policy Decision
The Reserve Bank of New Zealand has lately moved to the dovish side, freeing the door to rate cuts down the line. Nevertheless, RBNZ Governor Adrian Orr and his team are unlikely to cut the 1.75% Official Cash Rate just now. So, what’s there for us?
The Orr is expected to hold a press conference at 22:00 (GMT) and a repetition of the dovish policy and particularly a hint of an imminent rate cut may weigh on the New Zealand dollar.
Thursday- Sept 27
USD – Core Durable Goods Orders m/m
At 12:30 (GMT), the Census Bureau will be releasing the core durable goods for the United States. It’s an economic indicator that measures the change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items.
The orders are expected to gain by 0.4% which is higher than the 0.1% gain in Aug 2018. Looking at the past six months of history, core durable goods have shown much deviation from the forecast and previous figures which is actually very good from the trading point of view. The more it deviates, the more we have chances to capture the price fluctuations.
USD – Final GDP q/q
It’s a quarterly figure and does place a good impact on the financial markets. In the Q2 2018, the US economy grew at an annualized pace of 4.2%, the fastest in four years. The Q3 release of GDP is also expected to show similar numbers, allowing Trump to take another victory round. A release of 3.5 or lower figure can cause a sharp selling in the dollar.
Friday – Sept 28
GBP – Current Account
The Office for National Statistics is forecasted to release the current account at 8:30 (GMT). It’s a difference in value between imported and exported goods, services, income flows, and unilateral transfers during the previous quarter. Figures are expected to show a trade deficit of 19.4 billion vs. 17.7 billion in June 2018.
GBP – Final GDP q/q
The Office for National Statistics is forecast to release the GDP figure at 8:30 (GMT). The GDP (gross domestic product) is expected to remain unchanged at 0.4% vs. 0.4% in the previous quarter.
However, considering the recent jump in the UK’s Inflation figures from 2.5% to 2.7%, can we expect echoes in GDP? Well, we should be ready for it. On the release of the positive news, Sterling can stay bullish as the BOE (Bank of England) will be expected to keep the hawkish tone in its monetary policy meetings.
CAD – GDP m/m
Likewise, the Statistics Canada is due to release the gross domestic product at 12:30 (GMT). Traders, it will be really interesting to see how recent tariffs from the U.S. has impacted Canadian productivity.
Economists’ expectation is 0.1%, up from 0.0%. It’s likely to support the Loonie at least until the release of news. All the best and stay tuned to FX Leaders economic calendar for live coverage and forex trading signals. Have an awesome weekend.