We bring you another short summary of economic events that have affected our trading
during the last trading week.
Last week was again marked by interest rates. Australia offered us a decision on interest rate changes on Tuesday and New Zealand the day after. This type of economic indicator is one of the most important for us to follow. In general, a higher than expected (previous) interest rate is bullish for a given currency. Conversely, a lower one is bearish.
As I mentioned above, on Tuesday, Australia offered us a decision on interest rates, which as expected remained unchanged (0.10 %). According to Reuters, the objectives are clear: maintain the money rate target at 10 basis points and continue buying $4 billion of government securities per week until at least mid-February 2022. The central scenario says that the conditions for a rate hike will not be met until 2024.
On the same day, we were impressed by the speech of the President of the European Central Bank (ECB) - Christine Lagarde, who reacted to the shortage of supply and the rising price of energy. Lagarde noted that these phenomena cannot be influenced much by our monetary policy, so we should not overreact to them. However, she will continue to pay close attention to the evolution of wage inflation expectations to ensure anchoring at 2 %.
On Wednesday, the Reserve Bank of New Zealand raised its official cash rate from 0.25 % to 0.5 %. Further removal of monetary policy stimulus is expected over time. Further, headline CPI inflation is expected to rise above 4 % in the near term. This should be positive news for the NZD in the long run.
What's in store for the current trading week?
This week we will focus our attention mainly on the GDP results in the UK and Thursday's
employment change in Australia.
Sources:
https://www.forexlive.com/
RBA Gov Lowe: https://www.forexlive.com/
We bring you further commentary on the events that affected our trading at the end of the trading month of September.
Over the past week, we have been able to look forward to speeches by central bank leaders such as Christine Lagarde (President of the European Central Bank), Andrew Bailey (Governor of the Bank of England) and Jerome Powell (Chairman of the Federal Reserve).
GBP
In Monday's speech by the BoE Governor, we were able to hear Andrew Bailey look at the various forces currently acting on the economy and what they mean for monetary policy. One of these is supply bottlenecks affecting the availability of goods and services. Bailey also said that the rate of recovery has slowed in recent months and this slowdown is still continuing. Compared to the fourth quarter of 2019, the level of GDP was 3.5 % lower in July, according to the latest data.
The emerging energy crisis in the UK is also a big topic of the week. The global gas shortage has exposed the flaws in the energy transition. The UK is more vulnerable to gas demand than most other developed economies. The lack of natural gas storage facilities in the UK, where capacity has been allowed to shrink in recent years, has amplified the risks of global fuel shortages and raised fears that energy supplies will not last.
On the back of these economic results and reports, the pound has fallen on virtually all currency pairs. I think this theme will be with us for some time to come and we will have our attention on the pound in the trading days ahead.
USD
In Wednesday's speech, the Fed chairman mentioned that the US supply-side constraint is what is really holding the economy back. Q3 GDP estimates were downgraded, though still at strong levels.
What's in store for the current trading week?
This week will again be one of the more volatile ones. Markets will focus mainly on Tuesday and Wednesday's interest rate decisions in Australia and New Zealand.
Sources:
https://www.bankofengland.co.uk/
Image source: https://www.wsj.com/articles/global-gas-shortage-stings-u-k-showing-shortcomings-in-its-energy-transition-11633005732
We bring you another summary of the most interesting economic events that have had an impact on the currency markets.
Last week was very unusual for its increased market volatility, which was caused by a series of interest rate decisions in several countries.
Our eyes were mainly on the middle of the week when these decisions were made.
On Wednesday, the Bank of Japan left its monetary policy unchanged, as expected. However, it offered a weaker outlook for exports and output, which reinforced expectations that the bank would maintain its stimulus. Japan's economy remains in dire straits, but there is light at the end of the tunnel. Japan's economy is likely to recover once the pandemic begins to fade... Everything is trending. Depending on these economic events, we have seen the Japanese yen weaken on most currency pairs.
On the same day, the Fed offered us its fundamentals, leaving interest rates unchanged. However, it was more hawkish than expected and the strengthening of the US dollar did not take long to take hold. Fed Board of Governors Chairman Jerome Powell said that there will be a gradual tapering that will end around mid-2022. However, the path of the economy continues to depend on the course of the virus. Advances in vaccination are likely to continue to reduce the impact of the crisis on the economy, but risks to the economic outlook remain.
The very next day we were introduced to the Bank of England, which again left interest rates unchanged. At this meeting, the Committee judged that the current monetary policy stance remained appropriate.
We expect this week to be a bit quieter than the previous one. However, our eyes will remain on Wednesday's GDP in the UK and the US. The week will also offer us a few more interesting outputs from European Central Bank President Christine Lagarde.
Sources:
Photo by Anna Nekrashevich from Pexels
Last week offered us a number of interesting economic results, which we used for our trading on the foreign exchange markets.
Our eyes were mostly on the US dollar and its results from US retail sales, which unexpectedly rose in August. With this surprisingly strong August report, the US dollar was unceremoniously pleased and began to strengthen confidently. Thus, from a certain perspective, US retail sales are 15.1 % higher than they were last year.
At the end of the week, the US dollar was boosted by rising yields on 10-year US Treasuries. Analysts at Goldman Sachs expect US Treasury yields to rise, but despite these economic indicators, the US dollar will fall for the rest of 2021.
The Australian dollar also offered further trading opportunities last week as it began to weaken slightly due to higher consumer inflation and mild concerns about the Delta virus mutation. RBA Governor Lowe uttered that the Delta outbreak, although delayed, did not derail the economic recovery.
In the eurozone, we were intrigued last week by ECB Executive Board member Isabel Schnabel and her additions to the latest ECB statement. Schnabel predicts that inflation in the eurozone is likely to ease noticeably next year. People are understandably worried about inflation developments, so their eyes will be on the central bank's next statements.
This week, the US and Japan will offer us interesting fundamental aspects in terms of interest rate decisions. Given such events, we expect more volatility in the markets, which will have an impact for trading.
Sources: https://www.forexlive.com/
Photo by Anna Nekrashevich from Pexels
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