Trading on key Forex news: we are waiting for the results of the meetings of the central banks of Switzerland and the UK, speeches of the heads of the central banks of Japan, Australia, the USA, and the Eurozone, as well as the OPEC meeting, which will attract the attention of the oil market participants in view of the expectations of important statements by OPEC regarding the softening of the oil production reduction program.
The week, which was very full of political and economic events, ended with a sharp increase in the dollar.
The dollar index DXY reflecting its value against the other 6 major currencies increased by a record 143 points to the level of 94.93 on Thursday. On Thursday, the highest intraday growth was registered at least for the last year.
The growth of the DXY dollar index was supported by the Fed's decisions to both raise the rate, which was expected, and to accelerate the pace of tightening monetary policy, and the ECB's decision to extend the QE program until the end of the year and keep rates at current levels "at least until the summer of 2019". The euro fell sharply on Thursday after the ECB meeting, and the euro-dollar declined by 225 points.
On Friday, DXY reached a new high at around 95.15 at the beginning of the trading day. However, then there was a decrease in DXY, which was mainly due to the corrective growth of the euro and the pound against the dollar.
Despite the corrective decline of the dollar against the euro on Friday, the general positive dynamics of the dollar and DXY remains.
The dollar rose sharply at the end of the week, especially against commodity and Asian currencies, which was due to the growing fears of investors about the escalation of the trade conflict between the US and China.
On Friday, Trump administration announced the introduction of duties on the import of goods from China for the total amount of $50 billion. The State Council of China said on Friday that the return "duties will be promptly introduced to US goods, including agricultural products, cars, seafood". China will impose duties at a rate of 25% on 545 American goods for the amount of about 34 billion dollars on July, 6th. For the remaining items (659 items in total), the date of entry into force will be published by China later.
As always, a number of most important macroeconomic data are expected to be published this trading week and several important news are published.
Monday, June 18
20:30 (GMT+3) EUR Speech by ECB President Mario Draghi
During the speech of the ECB head Mario Draghi, the volatility increases not only in the euro and the European stock indexes, but also throughout the financial market, especially if it touches the subject of the ECB's monetary policy.
The greatest volatility is caused by Mario Draghi's statements at a press conference immediately after the ECB's regular meeting on monetary policy, as it was last Thursday, when the EUR/USD fell by 225 points in one day, and the volatility was almost 290 points. During other appearances of Mario Draghi, the reaction of the market is usually less active.
The soft tone of Mario Draghi's speech and the propensity to continue the ECB's extra soft monetary policy will have a negative impact on the euro. Although, everything has already been said and done at the June meeting of the ECB held on Thursday.
Tuesday, June 19
04:30 AUD Minutes of the last meeting of the Reserve Bank of Australia
This document is published two weeks after the RBA meeting and the decision on the interest rate. If the RBA assesses the state of the labor market in the country and the GDP growth rate as positive and also displays a hawkish attitude toward the inflation forecast in the economy, the markets regard this as a higher probability of a rate raise at the next meeting, which is a positive factor for the AUD. The bank's soft rhetoric regarding, above all, inflation puts pressure on the AUD.
11:00 EUR Speech by ECB President Mario Draghi
Next week after the ECB meeting, investors will continue to analyze the statement of the European Central Bank on the completion of quantitative easing program in December, and will closely monitor the new signals about the increase in interest rates. The ECB said it planned to complete the bond purchase program worth 2.5 trillion euros in December, and promised not to raise interest rates until the summer of 2019.
If the head of the ECB Mario Draghi says something new in this respect, then volatility, primarily in the euro, will grow.
Wednesday, June 20
02:50 JPY Meeting of the Policy Board of the Bank of Japan
On Friday, Bank of Japan decided to continue to adhere to its super soft monetary policy. With 8 votes to one, the Bank of Japan voted to keep the target level of 10-year Japanese government bond yields around zero, and the short-term deposit rate at -0.1%. The bank also confirmed its commitment to purchase government bonds worth 80 trillion yen ($ 725 billion) per year.
"For Japan, it is appropriate to patiently pursue the current soft monetary policy," Kuroda said at the press conference. "The difference in monetary policy between the Bank of Japan and other central banks reflects differences in economic and price conditions in each country".
Based on the results of the meeting, the Bank of Japan conducts an analysis of economic dynamics in Japan and beyond and gives indications of possible prospects for financial policy. The publication of the statement following the meeting may cause volatility of JPY.
16:30 EUR, AUD, USD Speeches of the heads of the central banks of the Eurozone, Australia, and the USA
Unexpected statements by the leaders of the ECB, the RBA, the Fed can cause a sharp increase in volatility of the euro, the Australian dollar, and the US dollar.
Thursday, June 21
00:45 NZD New Zealand's GDP for the first quarter
The publication of data will cause increased volatility in NZD. Against the background of rising prices for agricultural products in recent years (especially for dairy products, which is an important part of New Zealand's exports), it is likely that the report on New Zealand's GDP for the first quarter will show positive indicators, and this will positively affect the positions of the New Zealand currency.
Forecast: + 0.5% (previous value + 0.6%). If the data is better, the NZD will strengthen.
10:30 CHF Swiss National Bank's decision on interest rate
The current rate on deposits is in the negative territory and is at -0.75%. Forecast: the rate will remain at the same level of -0.75%. The Swiss central bank has consistently advocated a soft monetary policy in the country, and the traditional currency rate has traditionally been considered "overvalued". Recently, the franc has largely lost the status of a safe haven currency, and the threat of intervention certainly keeps the franc from excessive growth.
12:00 CHF The NBS Press Conference
In the first part of the press conference, a statement is read out, after which the press would ask questions to the head of the central bank. During the second part, volatility may increase because representatives of the National Bank can provide previously unknown information. Traders will wait for signals about further plans for the monetary policy of the NBS from the chairman of the NBS, Thomas Jordan. Tough rhetoric of Jordan's speech will help strengthen the franc. A soft tone of the speech and the propensity to continue the extra soft monetary policy of the NBS will have a negative impact on the franc. High volatility is expected on the foreign exchange market, and, first of all, in the franc trading.
14:00 GBP The Bank of England's interest rate decision. Report on Monetary Policy. Minutes of the meeting of the Bank of England
The Bank of England's interest rate decision. It is expected that the rate will remain at the same level of 0.5%. Also, at this time the following data are published: report on monetary policy with the results of voting on the rate and other issues, as well as with comments on the state of the economy; minutes of the Monetary Policy Committee (MPC) of the Bank of England with the distribution of votes for and against the increase / decrease in the interest rate. The main risks for the UK after Brexit are associated with expectations of a slowdown in the country's economic growth, as well as a large current account deficit in the UK's balance of payments.
At the same time, with regard to the stability of the pound, things may not be so bad. High inflation in the UK may force the Bank of England to take the path of further tightening of monetary policy and a new interest rate hike. This (in the long run) can strengthen the pound, even against the background of the negativity associated with the Brexit procedure.
The intrigue about the further actions of the Bank of England remains. Both in the pound and the FTSE100 index trading, a lot of trading opportunities appear during the publication of the bank's decision.
Friday, June 22
15:30 CAD Retail sales level. Core Consumer Price Index in Canada
The retail sales level (excluding sales of cars) is often considered an indicator of consumer confidence, which reflects the state of the retail sector in the short term. The growth of this indicator is a bullish factor for the CAD. Forecast: in April, the growth in the level of retail sales amounted to 0% (against growth of + 0.6% in March), which should negatively affect the CAD quotes if the forecast is confirmed.
The Core CPI of the Bank of Canada reflects the dynamics of the retail prices of the basket of goods and services (excluding fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transport, and tobacco products). The target inflation rate for the Bank of Canada is in the range of 1%-3%. The growth of the CPI is a precursor of the rate increase and a positive factor for the CAD. Forecast: in May, consumer prices rose in Canada by 1.4% (against + 1.5% in April) y-o-y. This is a weak indicator, which will negatively affect the CAD if confirmed.
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