The market ended last week with support for many of the major FX as domestic data improved in response to the surge in economic activities. This week will be loaded with high-impact data including bank statements and the US NFP on Friday. What are the things you need to know?
Last Week Recap
Policymakers continue to monitor economic data to detect the pace of recovery after what the world has passed through with Covid. The central banks have started to loosen up and will consider tightening their policies after much-improved data and with the understanding that inflation will adjust gradually. The BoC led the way in April with an outlook that the bank would consider hiking up its interest rate toward the end of 2022. The CAD has been on the rise since the last monetary policy meeting, beating several of its peers especially the dollar although also being aided by strong oil prices.
Last week, the RBNZ and BoE policymakers joined with a similar outlook – late 2022 was suggested as the likely date for a rate hike. GBP and NZD gained across the board last week. Also, some members of the US FOMC have started discussing Fed’s policy tapering although much has not been discussed about a rate hike. Investors therefore expected at least a cut in the Fed’s current asset and bond purchases. The dollar thus got a lift last week but the bullish DXY was tamed below 90.46 and ended the week close to breakeven. Fed Chair Powell could add some momentum on Friday before the Non-Farm Payroll data. It’s going to be an important make-or-break week for the dollar.
Meanwhile, Covid-19 resurgence in Asia remains a major concern, especially in India and Japan. The Yen resumed the downward slope last week after Japan declared a fresh three weeks lockdown.
Market themes this week
In the coming weeks, policymakers will remain focused on reports from the Covid front and the strength of the current economic recovery. A faster pace of recovery together with a subdued Covid will encourage policy tightening. RBA and BoE’s Bailey on Tuesday then Fed’s Powell on Friday could also trigger upbeat moves on the Aussie, Sterling and the dollar respectively.
Macro-economics and Central Banks
US and UK Bank holidays together with many low-impact releases might cut down momentum on Monday.
However, on Tuesday, the RBA rate statement will open the day. Market consensus suggests an unchanged rate of 0.1%. However, the bank might go in the way of the RBNZ as they share strong ties. In the London session, the Eurozone PMIs could support a Euro retest of $1.225 or rather disappointing data dragging it toward $1.21. Later in the day, the BoE Governor Bailey will speak and might address Gertjan Vlieghe ‘s last week rate hike signal before FOMC’s Brainard. Meanwhile, the OPEC+ meeting will also be watched closely by traders and investors.
On Wednesday, Aussie GDP will follow Tuesday’s RBA statement before RBA deputy governor Debelle speaks few hours into the London session. Afterward, more low-impact data releases before speeches from FOMC’s Bostic and Evans.
On Thursday, we will have the Aussie retail sales during the Asian session and Euro-zone PMIs in the first hour of the London market. Later in the day, the US ADP NFP and unemployment claims will be released before the US ISM PMI early in the New York market. Crude oil inventories and BoE’s Bailey’s speech before FOMC’s Bostic and Quarles. From all these speeches from central bank monetary committee members, investors and traders will want to decipher clues concerning tapering and rate hikes.
On Friday, after speeches from the Central Bank duo of SNB Chair Jordan and RBNZ Governor Orr, the G7 meeting will commence. Before the mighty CAD and US employment reports including the employment change (NFP) and unemployment rate, ECB President Lagarde and Fed Chair Powell’s speeches at the panel discussion titled ”Central banks and climate change” will be scrutinized.
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