Trading on key Forex news: we are expecting the publication of the ECB's decision on the interest rate, as well as annual data on US GDP for the 2nd quarter (preliminary release).
On Thursday, US President Donald Trump said that the strengthening of the dollar reduces the competitiveness of American goods in world markets and he is not "happy" about the Fed intending to raise rates. This caused a sharp decline in the dollar on Thursday. On Friday, the decline in the dollar continued. It was provoked by macro statistics from Canada. As the National Bureau of Statistics of Canada reported, Canadian retail sales increased substantially in May after falling in April.
Retail sales in May rose by 2% compared to April and amounted to 50.76 billion Canadian dollars (38.29 billion US dollars). The market expected ф monthly growth in sales by 1%. The annual growth of retail sales in May was 3.6%.
On Friday, Donald Trump once again mentioned the undesirability of a high interest rate. "China, the European Union, and other countries are manipulating their currencies and interest rates by cutting them, while the US is raising its rates, and the dollar is getting stronger every day, which deprives us of a great competitive advantage," Trump wrote in his Twitter on Friday.
At the end of the week, the dollar declined. The dollar index DXY, which tracks the rate of the US currency against the basket of 6 other major currencies, after it reached another year high close to 95.44 on Friday, fell on Friday, closing the week in the negative territory near the 94.25 mark.
Nevertheless, Trump's statement concerning the relatively high interest rate will have only a short-term effect on the dollar, according to market participants. The central bank is accountable to the Congress and is obliged to restrain inflation.
In June, the Fed raised the key rate by a quarter of a percentage point for the second time this year. Fed executives confirmed their propensity to conduct 4 interest rate increases in 2018.
The US dollar reached its highest level in more than a year on Thursday, receiving support from optimism about the US economy. The dollar index DXY rose to 95.44, the highest level since July 2017.
Despite the strong decline on Friday, long positions in the dollar look preferable.
The difference in the monetary policies of the world's largest central banks and the Fed is the main fundamental factor in favor of further growth of the dollar against other major currencies-competitors.
The focus of traders' attention this week will be on the ECB meeting and publication of the interest rate decision, as well as data on US GDP in the second quarter
Monday, July 23
There are no important marco economic news planned
Tuesday, July 24
There are no important marco economic news planned
04:30 (GMT+3) AUD Consumer Price Index. The RBA's core inflation index by trimmed mean method (Q2)
Inflationary consumer price index (CPI) for the second quarter of this year published by the RBA and the Australian Bureau of Statistics, assesses the dynamics of retail prices of goods and services in Australia. CPI is the most significant indicator of inflation and changes in buyers' preferences. The high value of the indicator is a positive factor for AUD, and a low value is negative. Previous value of the indicator was + 0,4%. The indicator is expected to grow by + 0.5%, which should positively affect the AUD. If the value of the indicator is below the forecast, this will negatively affect the AUD.
The RBA core inflation index by trimmed mean method for the second quarter published by the RBA and the Australian Bureau of Statistics reflects the dynamics of retail prices of goods and services that make up the consumer basket. The simple trimmed mean method takes into account the weighted average core, the central 70% of the components of the index. The previous value of the index is + 0.5%. The forecast suggests that the value of the indicator has not changed, which should negatively affect the AUD.
Thursday, July 26
14:45 EUR ECB's decision on rates.
The ECB publishes its decision on the key rate and the deposit rate. The ECB's tough position on inflation and the level of key interest rates helps strengthen the euro, a soft position and lower rates weaken the euro. Forecast - the rate will remain at the same level of 0%. The ECB deposit rate for commercial banks is also likely to remain unchanged at -0.4%.
Earlier, the central bank promised to continue buying European bonds under the QE program until September 2018, and also said that ше would not consider raising rates for a long time after the completion of this program. The rate increase in the Eurozone is unlikely in 2018.
15:30 EUR The ECB press conference.
The ECB head Mario Draghi will speak at the press conference. We expect a surge in volatility not only in the euro, but across the entire financial market. Mario Draghi is famous for being able to reverse financial markets with his own comments. Similar previous ECB's decisions on interest rate and subsequent press conferences moved the euro rate by 3-5% in a short time. Draghi will assess the current economic situation in the Eurozone and comment on the ECB's decision on rates.
Пятница 27 Июля
02:30 JPY CPI in the Tokyo region (ex fresh food)
This consumer price index published by the Bureau of Statistics of Japan reflects the evaluation of price dynamics obtained as a result of comparison of retail prices of the corresponding basket of goods and services. The CPI Tokyo index excluding the price of fresh food, an important barometer of changes in consumer trends, was at 0.7% in June (in annual terms). Inflation in Japan is still low. The growth of the indices may provoke the strengthening of the yen. During the publication of the CPI indices, the volatility of trade in the yen and the Japanese stock market is expected to increase.
15:30 USD Annual GDP of the USA (preliminary release). Personal consumption expenditure(PCE) for the 2nd quarter
Data on GDP are one of the key (along with data on the labor market and inflation) for the Fed in terms of its monetary policy. A strong result strengthens the US dollar; a weak GDP report has a negative effect on the US dollar. In the previous quarter, GDP growth was + 2.0%. The forecast for the 2nd quarter of this year is + 4.0%. If the data prove to be worse than the forecast, the dollar will react with a decrease.
The basic price PCE index is an important indicator of inflation, reflecting the average amount of money that Americans spend per month on durable goods, consumer goods and services (ex food and energy). This indicator is one of the most important indicators that the Fed takes into account when deciding on the rate.
A high indicator is considered as a positive factor for USD, the data below the forecast will adversely affect theUSD rate. Forecast: in the 2nd quarter, the index was at 1.8% (against the previous value of 2.3%).
Price chart of EURUSD in real time mode
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