The Fed will cut US interest rates this week! The Bank of England may cut interest rates too! And the Bank of Japan will probably stay on hold!
It’s a pivotal week in the 7.5 trillion dollar daily foreign exchange market. The US dollar makes up 88.5% of all trades; the Japanese yen, 16.7% and the British pound, 12.9%.
The Fed have been telegraphing a cut for months; 25 basis points is likely but some are arguing for 50bp. On Wednesday we will find out.
UK data has not been that exciting recently. Last week GDP, manufacturing production, and industrial production all disappointed. This week on Wednesday UK inflation numbers are out. CPI is expected to read 2.2% y.o.y for August. If Services inflation falls, we may see a surprise cut from the Bank of England on Thursday.
On Friday it’s the turn of the Bank of Japan. “Unchanged” is the call of most analysts. According to Reuters “Sanae Takaichi, Japan’s minister in charge of economic security and a leading candidate in the ruling party’s leadership race, said on Saturday the central bank should maintain ultra-low interest rates to support the fragile economic recovery.”
Outside of these three blockbuster events, we have US Retail Sales and Canadian CPI on Tuesday which are both expected to drop in August, Euro Area CPI on Wednesday which is also expected to drop in August, and Australian employment figures for August on Thursday, with analysts’ forecasts of 25,800 new jobs created and the unemployment rate stable at 4.2%.
We also have the Philadelphia Fed Index on Thursday which is expected to show a decline of -0.6% for September and Japanese inflation figures on Friday just prior to the bank of Japan announcement. Japanese Core CPI is expected to rise a tick to 2.8% y.o.y for August.
There should be plenty of trading opportunities in G3 currencies, the British Pound and XAUUSD this week.
Good Luck and Good trading!
Ben Robson is Head of Institutional E-FX at Swiss Finance Corporation. He is also the Amazon Best Selling Author of Currency Kings – How Billion traders Made their Fortune Trading Forex. McGraw Hill 2017
