Trading on key Forex news: we are looking forward to the results of the meetings of central banks of Japan, the United States, and Great Britain devoted to monetary policy issues, and publication of decisions on the interest rates. Also, the focus of traders will be on the data on consumer inflation and GDP of the Eurozone for the second quarter, as well as data from the US labor market for July.
The main event of the past week was the ECB meeting on monetary policy issues. However, there were no surprises. The European Central Bank kept current rates at the same level. The key interest rate remained at 0%, the deposit rate at the level of -0.4%. The program for the repurchase of European assets will end, as previously announced, at the end of December 2018, although the volume of asset repurchase after September will be reduced to 15 billion euros from the current 30 billion euros.
ECB President Mario Draghi, at the press conference after the meeting of the central bank, said that "the expected increase in ECB rates next year is already priced in the quotes".
Draghi expressed his hope that the slow growth of the European economy in the first half of 2018 is temporary, and economic risks remain balanced.
The euro fell after the ECB meeting and press conference, losing about 88 points against the dollar.
The euro lost ground, won the day after the meeting of US President Donald Trump and European Commission President Jean-Claude Juncker, who on Wednesday agreed to begin negotiations on eliminating trade barriers between the EU and the United States.
As Juncker said, the US and EU will review the existing duties on steel and aluminum, and "there will be no new duties". At the same time, the EU agreed to reduce duties on manufactured goods from the United States.
As a result of last week, the dollar retained positive dynamics, being in demand among investors against expectations of further tightening of the monetary policy of the Fed.
The new week promises to be full of important events of an econic nature. The focus of the traders' attention this week will be on the meetings of central banks of Japan, the United States, Great Britain devoted to monetary policy issues and publication of decisions on interest rate, consumer inflation and Eurozone GDP for the second quarter, as well as data from the US labor market for July .
As always, a number of important macroeconomic data are expected to be published on the new trading week and several important news are to be released.
Monday, July 30
15:00 (GMT+3) EUR Harmonized index of consumer prices (HICP) in Germany
This index is published by the Statistical Office Of The European Communities and is calculated on the basis of the statistical methodology agreed upon by all EU countries. It is an indicator for assessing inflation and is used by the ECB Governing Council to assess the level of price stability. A positive result strengthens the EUR, a negative result weakens it.
Forecast: in July, the HICP index (in annual terms) increased by 2.1% (against + 2.1% in the previous month). If the data prove to be better than the forecast, then the euro will strengthen for a short time.
Tuesday, July 31
05:00 JPY The Bank of Japan's decision on the interest rate. Press conference of the Bank of Japan and comments on monetary policy
The Bank of Japan is making a decision on the interest rate. At the moment, the basic discount rate in Japan is in the negative territory, amounting to -0.1%. Most likely, the rate will remain at the same level. If the rate is lowered and goes to a negative territory to -0.2%, then such a decision will cause a sharp decline in the yen on the foreign exchange market and growth on the Japanese stock market. In any case, during this period of time, a volatility jump in the yen and the Asian financial market is expected.
It should be noted that above the key support levels of 110.20 (the Fibonacci level 38.2% of correction to the growth since August of last year and the level of 99.90), 110.00 (EMA200 in the daily chart), the upward trend of the pair USD/JPY prevails. Probably, its growth will continue, against the background of different focuses of monetary policies of the Bank of Japan and the Fed.
12:00 EUR Eurozone GDP (preliminary release). Consumer Price Index (CPI). Core CPI
GDP is considered an indicator of the overall state of the Eurozone economy. The growing GDP is considered positive for the EUR, a low result weakens the EUR.
Recently, the Eurozone has shown macro data indicating a slowdown in the growth rate of the European economy. Against the backdrop of steadily low inflation, the risks of a slowdown in the growth of the European economy may pause the likelihood of the completion of the QE program for an indefinite period.
Nevertheless, the ECB President Mario Draghi, during a press conference after the meeting of the central bank that ended last week, assured that economic risks remain balanced, and low growth rates in the first half of 2018 are temporary.
Forecast: in the second quarter of Eurozone GDP grew by 0.4% (+ 2.4% in annual terms). If the data are weaker, the euro will decline. Data better than the forecast will strengthen the euro.
The Consumer Price Index (CPI) is published by Eurostat and determines the change in prices of the selected basket of goods and services for a given period. It is a key indicator for assessing inflation and changes in consumer preferences. A positive result strengthens the EUR, a negative result weakens it.
Forecast: in July CPI (in annual terms) grew by 2.0%, Core CPI grew by 0.9% (against 0.9% in the previous month).
In general, the data is strong. The euro should respond positively to this publication. If the data prove to be better than the forecast, then the euro will grow more significantly.
15:30 USD Basic price index - personal consumption expenditures
The data are published by the Bureau of Economic Analysis of the US Department of Commerce and reflect the average amount Americans spend per month on durable goods, consumer goods and services (excluding food and energy). One of the most important indicators of inflation, which is taken into account by the Federal Reserve when deciding on the interest rate.
A strong result strengthens the US dollar. The indicator below the forecast weakens the dollar. Forecast: in June, personal consumption expenditures of Americans increased by 1.9% (in annual terms) against + 2.0% in May. The data itself is strong. However, their relative deterioration is a negative factor for USD. If the data prove to be even weaker, the dollar may fall significantly in the short term.
Wednesday, August 1
01:45 NZD Changes in the employment rate. Unemployment rate (data for the 2nd quarter)
Also at the same time, the Bureau of Statistics of New Zealand publishes a report on unemployment - an indicator that measures the ratio of unemployed population to the total number of able-bodied citizens. The growth of the indicator shows the weakness of the labor market, which leads to a weakening of the national economy. Decrease in the indicator is a positive factor for NZD. Forecast: unemployment in New Zealand in the 2nd quarter increased by 0.1% to 4.5%.
In general, the indicators can be referred to as negative. Probably, the NZD will decrease with the confirmation of the forecast.
21:00 USD The Fed's decision on the interest rate. FOMC Report
During the publication of the decision on the rate and the FOMC report, a surge in volatility is expected throughout the financial market, primarily on the US stock market and in dollar quotes.
Comments from the Fed may affect both short-term and long-term trade in the USD. Investors would like the Fed to confirm the possibility of 4 rate increases this year.
Thursday, August 2
14:00 GBP Bank of England decision on interest rate / Monetary Policy Report / Minutes of the BoE meeting
The Bank of England's interest rate decision. It is expected that the rate will be increased by 0.25% to 0.75%. Also at this time, the following items are published: a report on monetary policy with the results of voting on the rate and other issues and with comments on the state of the economy; the 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, it might 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 backdrop of the negativity associated with the Brexit procedure.
The intrigue about the further actions of the Bank of England remains. And in the pound trade and the FTSE100 index, a lot of trading opportunities will be there during the publication of the bank's decision.
Friday, August 3
02:50 JPY Meeting of the Committee on Monetary Policy of the Bank of Japan
The Committee will conduct an analysis of the economic situation in Japan and provide guidance on the prospects for the financial policy of the Bank of Japan. If the tone of the protocol indicates the firmness of the Bank of Japan's intentions with respect to monetary policy in the country, it will negatively affect the stock market in Japan and strengthen the yen. Conversely, soft rhetoric about the prospects for the monetary policy of the bank will help weaken the yen.
15:30 USD Average hourly wage. New jobs outside the agricultural sector. Unemployment rate
These are the most important indicators of the labor market in the US in July. Forecast: + 0.3% (against + 0.2% in June) / 195 000 (against 213 000 in June) / 3.9% (against 4.0% in June).
In general, the indicators can be referred to as strong. If they coincide with the forecast or are better, this will have a positive effect on the USD. However, it is often difficult to predict the market reaction to the publication of the indicators. In any case, when these indicators are published, a surge in volatility is expected in the trade not only in the USD, but throughout the financial market. Probably the most cautious investors will prefer to stay out of the market in this period.
Price chart of GBPUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.