Trading on key Forex news: we expect the publication of decisions of the ECB, the Fed, and the Bank of Japan on interest rates.
By the end of last week, the US dollar declined. The dollar index DXY reflecting its value against the other 6 major currencies lost 0.6% in a week. After last week DXY reached the annual maximum at around 94.97, on Friday the index fell to the level of 93.55.
The political upheavals in Italy and Spain have subsided, and now the escalation of trade war comes to the fore. "When the foreign trade deficit is almost 800 billion dollars a year, one cannot afford to lose a trade war. Other countries have been ripped off by the US for years, it's time to start thinking," Trump wrote in his Tweeter. "Please tell Prime Minister Trudeau and President Macron that they are charging huge taxes and imposing non-tariff restrictions on the United States," Trump added.
Leading economists believe that the global trade war will cause significant harm to international trade and the world economy.
This week, traders will focus their attention on the ECB and FRS meetings on monetary policy.
While the ECB is likely to refrain from any action with regard to its monetary policy, the Fed, with a probability approaching 100%, will raise the rate by 0.25% to 2.00%.
The greatest attention of traders will be focused on the accompanying statement of the Fed. 3 rate increases are already priced in the dollar quotes. If the Fed gives a signal about the possibility of 4 rate increases this year, the dollar may resume its growth.
As always, a number of the most important macroeconomic data and several important news are expected to be published this new trading week.
Monday, June 11
Australia celebrates Queens Birthday, Australia 200 Index (ASX200) closed for trading.
Thiere are no publications of important macro data planned this day. However, financial markets may react with sharp movements at the market opening if at the G7 held on Friday and Saturday, unexpected decisions are made regarding trade relations with the United States.
Tuesday, June 12
Russia celebrates its national holiday - Russia Day, there is no trade on CFD MOEX.
11:30 (GMT+3) GBP Report on average wages in Britain for the last 3 months.
Monthly, the Great Britain Office for National Statistics (ONS) publishes a report on average wages for the period of the last 3 months, with and without bonuses.
This report is a key short-term indicator of the dynamics of changes in the wage level of employees in the UK. The increase in earnings is a positive factor for GBP, while the low value of the indicator is negative. Forecast: the report for April assumes that average wages, including bonuses, grew by 2.6% in the last 3 months (as well as in the previous month); without bonuses - by 2.9% (against + 2.9% in March, and + 2.8% in February). If the data is better than expected, the pound is likely to strengthen on the foreign exchange market.
15:30 USD Consumer Price Index. Core Consumer Price Index.
Block of important inflation indicators for the USA in May.
The Consumer Price Index (CPI) is a key indicator for assessing inflation and changes in consumer preferences. A positive result strengthens the USD, a negative result weakens it. Forecast: + 0.2% (against + 0.2% in April).
The Core Consumer Price Index (Core CPI) determines the change in the prices of the selected basket of goods and services for a given period. Food and energy are excluded from this indicator to obtain a more accurate estimate. A strong result strengthens the US dollar, while a low one weakens it. Forecast: + 0.2% (against + 0.1% in April) or + 2.2% against + 2.1% in April (in annual terms).
Wednesday, June 13
05:00 CNY GDP for the 1st quarter (second estimate).
The National Bureau of Statistics of China will provide data on GDP growth in the first quarter.
In the previous quarter, GDP growth was 1.6%. It is expected that China's GDP grew by 1.4% in the 1st quarter. If the data is confirmed, then this will indicate a slowdown in the growth of the Chinese economy, which will negatively affect the quotations of the yuan and the currencies of the Asia-Pacific region against the dollar.
China is the largest purchaser of primary commodities and the supplier of the finished product of the widest range to the world commodity market. The economy of China is the second largest in the world after the American one. Therefore, the publication of important macroeconomic indicators from China can have a strong impact on the entire financial market.
05:00 AUD speech by the head of the RBA Philip Lowey.
In the course of his speech, Philip Lowey will assess the current situation in the Australian economy and lay out further plans for the monetary policy of the department entrusted to him. Any signals from him regarding the change in the RBA monetary policy plans will cause a sharp increase in volatility of the AUD and the Australian stock market.
On Thursday, the AUD/USD lost 0.55%, down 45 points to the level of 0.7621.
After the information published on Wednesday that Australia's GDP in the 1st quarter grew by 3.1% (in annual terms), on Thursday negative information appeared on the decline in the surplus of the foreign trade balance of Australia in April.
The fall in exports compared with the previous month was 2.0%, while imports remained unchanged. Exports of coal fell by 7%, while exports of iron ore decreased by 4%.
As a result, the surplus of foreign trade in Australia in April was 0.977 billion Australian dollars (the forecast was 1.0 billion Australian dollars).
Economists believe that in the 1st quarter net exports supported GDP, and in the second quarter, its contribution could become more neutral.
Last Friday, the weakening of the AUD continued.
The RBA believes that interest rates will not be raised until consumers' incomes grow. Interest rates may remain unchanged for an even longer period after 2018, given the weak wage growth and the slowdown in the Australian economy.
"The Board does not see any weighty arguments in favor of adjusting the key interest rate in the short term", said the RBA in one of the latest statements.
Probably, Philip Lowey will repeat this assessment of the state of the economy, which will cause a decline in the AUD.
11:30 GBP Consumer Price Index (CPI). Core Consumer Price Index (Core CPI).
This index reflects the dynamics of retail prices for a set of goods and services that are part of the British consumer basket. The CPI index is a key indicator of inflation. A major movement of the pound and the index of the London stock exchange FTSE will take place around its publication. The annual consumer inflation in the previous month increased by 2.4% (against + 2.5% in March and + 2.7% in February), which is higher than the target level of the Bank of England of 2.0%. Inflation in the UK accelerated after the fall of the pound as a result of the referendum on the exit of the country from the EU and remains above the target level of the central bank since early 2017. The Bank of England will be very cautious about the issue of raising the interest rate, despite the high level of inflation in the country. However, a decrease in inflation in this case could have a positive impact on the pound quotes.
21:00 USD The decision of the Fed on the interest rate. A summary of economic forecasts from the US Federal Open Market Committee. Commentary of the Federal Reserve on monetary policy. Speech by Fed Chairman Jerome Powell.
It is widely expected that the rate will be increased by 0.25% to 2.00%.
After the decision on the interest rate, the Fed publishes a comment on the monetary policy (FOMC Statement). The report increases volatility in USD. The tough tone of comments on the Fed's further plans strengthens the US dollar, and the soft tone weakens it.
A summary of economic forecasts from the FOMC Economic Projections includes a Fed report with a FOMC forecast for inflation and economic growth for the next 2 years and, no less importantly, shows the individual views of FOMC members on interest rates.
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.
Powell's comments may affect both short-term and long-term trade in USD. A more hawkish position on the monetary policy of the Fed is seen as positive and strengthens the US dollar, while a more cautious stance is estimated as negative for the USD. Any hints by Powell on the possibility of a faster increase in the interest rate will cause the strengthening of the dollar and the fall of American stock markets.
Investors want to hear his opinion on the possibility of 4 rate increases this year.
21:30 USD FOMC Press Conference (Federal Open Market Committee of the US Federal Reserve).
The press conference of the US Federal Open Market Committee lasts for about an hour. In the first part, the decree is read out, followed by a series of questions and answers that can increase market volatility.
Thursday, June 14
04:30 AUD Employment level. Unemployment rate in Australia.
The employment rate reflects the monthly change in the number of employed citizens of Australia. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value of the indicator is a positive factor for the AUD, and a low value is negative. Forecast: in May, the number of employed citizens of Australia increased by 18,000 people (against +22,600 people in April).
Also at the same time, the Australian Bureau of Statistics publishes an unemployment report - an indicator that measures the ratio of the unemployed population to the total number of working citizens. The growth of the indicator shows weakness of the labor market, which leads to a weakening of the national economy. A decrease in the index is a positive factor for the AUD. Forecast: unemployment in Australia in May decreased by 0.1% to 5.5%.
If the data is confirmed, AUD will strengthen. If the values of the indicators are worse than the forecast, the Australian dollar will decrease.
09:00 EUR Harmonized Index of Consumer Prices (HICP) in Germany (second estimate)
This index is published by the EU Statistics Office and is calculated on the basis of the statistical methodology agreed upon by all EU countries. The index is an indicator for estimating 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 May, the HICP index (in annual terms) increased by 2.2% (against + 1.4% in the previous month).
12:00 CHF Press conference of the Swiss National Bank.
During the press conference and the speech of the SNB chairman Thomas Jordan, the volatility of the CHF trade increases, and traders are waiting for signals about further plans of the SNB monetary policy. Rigid rhetoric of Jordan's speech will help strengthen the franc. The soft tone of the speech and the propensity to continue the extra soft monetary policy of the SNB 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.
14:45 EUR The ECB 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 it 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 USD Retail sales (excluding car sales). Retail control group.
This report (Core Retail Sales Ex Autos) reflects the total sales of retailers of all sizes and types, except for car dealers. The change in sales in the retail sector is the main indicator of consumer spending. The report is leading, and further data can be heavily revised. A high result strengthens the US dollar, a low one weakens it. Forecast: + 0.4% (against + 0.3% in April), which should positively affect the USD.
Retail sales are the main indicator of consumer spending in the US, showing a change in sales in the retail sector. The indicator Retail Control Group estimates the volume in the entire retail industry and is used to calculate price indices for most commodities. A strong result strengthens the US dollar, and conversely, a weak report weakens the dollar. Forecast: the volume of retail trade in the US rose in May by 0.2% (against + 0.4% in April). If the data turn out to be weaker, the dollar will decrease.
15:30 EUR ECB press conference.
The press conference will feature a speech by the head of the ECB Mario Draghi. We should expect a surge in volatility not only in the euro, but on the entire financial market. Mario Draghi is famous for being able to unfold financial markets with his own comments. Previous similar 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.
Friday, June 15
05:00 JPY Bank of Japan's decision on the interest rate. Press conference of the Bank of Japan and commentary on monetary policy.
The Bank of Japan decides on the interest rate. At the moment, the basic discount rate in Japan is in the negative territory at -0.1%. Most likely, the rate will remain at the same level. If the rate is lowered and deepens to negative territory to -0.2%, such a decision will cause a sharp decline in the yen on the foreign exchange market and growth of the Japanese stock market. If the Bank of Japan again remains inactive, the yen will continue to strengthen. 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 in the past few weeks, the USD/JPY is trading near the key level of 109.50 (200-period moving average on the daily chart) without explicit drivers for movement in one direction or another.
12:00 EUR Consumer Price Index (CPI). Core Consumer Price Index (final release).
This indicator is published by Eurostat and determines the change in the prices of the selected basket of goods and services for a given period. It is a key indicator for assessing inflation and changing consumer preferences. A positive result strengthens the EUR, a negative result weakens it.
Forecast: in May, CPI (in annual terms) grew by 1.9% (against + 1.2% in the previous month), which should positively affect the euro.
Forecast: in May, the base index (Core CPI) increased (in annual terms) by 1.1% (against + 0.7% in the previous month). This is also a positive factor for the euro.
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