Last week was another volatile one in the financial market. The dollar plummeted across all the major pairs as the stock markets recovered from slumps it had earlier in the week to close bullish. What’s to look out for this week in the forex market?
Commodities ended the week bearish with Gold and WTI down by 0.4% and 3% respectively. Euro jumped by 1.3% (150 Pips) while GBPUSD dropped nearly half of the 2.2% (280 Pips) rally before the week ended as Brexit headlines weighed in. The week ended with better risk flow overall. Risky FX like AUD & NZD closed the week higher despite an earlier 1.2% fall.
This week in the Forex market – key drivers
Looking ahead this week, the market shouldn’t fall short of big volatilities as US politics, Brexit negotiations, Eurozone Covid 19 developments, macroeconomics, and bank monetary policies drive traders’ and investors’ sentiments.
In the US, as the elections draw nearer, the spotlight will be on the country’s GDP growth for the Q3. This will come along with other macroeconomic data like durable goods, personal income, and home sales. The market expects the world’s biggest economy to have grown by 30.8% between July and September.
In the Eurozone, the ECB is expected to announce fresh monetary policies. With restrictions enforced in some of the big European countries as a result of Covid19 resurgence, the market would look forward to possible QE adjustments from the ECB while rates are kept unchanged. Key economic data in the bloc include GDP and inflation reports. Just like in the US, the Eurozone economic growth is expected to bounce from the Q1 and Q2 slumps.
Elsewhere in Europe, the EU-UK Brexit negotiators are expected to resume talks. Optimism from the two camps gave the Pound some boost. However, it wasn’t absolute as the currency eventually declined in the last days of the last week. Brexit headlines are thus capable of driving the Cable in any directions. Traders should watch out!
Talking more about the Central banks, the Bank of Canada and the Bank of Japan will have their monetary policy meetings. Interest rates are expected to be unchanged. QE adjustments might not also happen. The banks should discuss more about how much their economies have recovered post-Covid – whether below, within, or above their expectation/forecast.
Other macroeconomic data include the Aussie inflation data – quarterly CPI. In Canada, monthly GDP data will be revised. CAD traders should also watch what happens in the energies market. WTI Crude could decline further in the course of the week as demands shrink due to Covid resurgence. AUD and NZD will continue to flow in direct correlation with the Wallstreet markets especially the S&P 500.
The US Presidential election is just about a week away. Volatility might calm toward the end of this week as investors pull out. Trump still trails Biden at the polls. In separate markets-centered polls, consensus suggests a Biden-friendly stock market and a Trump-friendly USD.
Finally, in China, attention will be on the country’s Communist Party Congress. The congress will include the party’s five year economic and social plan which investors and traders will be very much interested in. Happenings in China can directly or otherwise influence the Aussie and Kiwi economy or soften/bolden the US-China relation which will definitely come back after the November 3 US election.
Have a pleasant week and follow our daily analysis videos on our YouTube channel.
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