Last week was dull! EURUSD traded in a 70-point range, GBPUSD in a 100-point range and USDJPY in a 160-point range (These three currency pairs make up nearly 46 % of all FX volume.) Options implied volatilities are flatlining at multi-year lows. I ponder as to what the shock is that is going to jolt the FX market from its current state of torpor?
I have often been accused of being cynical regarding central bank minutes; they tend to follow the same format; The World’s economic situation, the domestic situation, some sort of self-congratulatory assessment that their policies are being successful, that inflation is moving back into line, that we are at or near the peak of an interest tightening cycle, that rates will remain unchanged and that there are uncertainties about inflation which they will monitor closely before committing to any change in policy. Cue the RBNZ’s committee statement of last week- I could have written it for them!
Actually, and in my mind pathetically, (and I exclude the Norwegian central bank here), they are all waiting for the Fed to cut interest rates and then they can all jump on the cutting bandwagon. This week Fed Chair Powell gives his testimony. I feel his inclination is to cut, but inflation is stubborn. We will find out what he has to say on Wednesday and Thursday!
Other potential market moving events are listed below.
Monday morning, 730am, Swiss inflation figures. Expectations are for a drop Y.o.Y for February to 1.1% from 1.3% in January. Watch out for $CHF, EURCHF, and EURUSD movement around this release.
Tuesday morning there are various Eurozone HCOB Services PMI releases which may cause some movement in the Euro. Tuesday’s main event is US ISM Services PMI for February which is expected to fall to 53 from January’s 53.3.
Wednesday starts with Australian Q4 GDP (Y.o.Y) which is forecast to drop to 1.5% from 2.1%. Eurozone Retail Sales is out at 10am (Y.o.Y- Jan)- the last print was negative 0.8%. US ADP employment numbers (Feb) will be released at 1.15pm with expectations of a healthy +150k print. Canadian interest rates are out at 2.45pm- unchanged at 5% is my call. (Press conference at 3.30pm- to be much like the RBNZ.) Fed Chair Powell hits the stage at 3pm.
Thursday at 1.15pm is the turn of the ECB to announce its interest rate decision- expect unchanged at 4.5%. Press conference at 1.45pm. (I refer readers to my comments above about how this is likely to be.) Balance of trade numbers for both the US and Canada will be released at 1.30pm. Fed Chair Powell will continue with his testimony at 3pm.
Friday morning at 10am Eurozone Q4 (Y.o.Y) GDP numbers are announced with expectations of an area which is teetering on recession. The afternoon will be interesting. Both Canada and the US release Employment numbers. Canadian unemployment is set to rise to 5.8%. Last month’s US Non- Farm Payrolls was huge at +353k. February’s number is expected to be an excellent +200k. I would expect a large revision downwards for January’s print. It’s difficult to pinpoint exactly how strong or weak the February total will be. But Friday afternoon at 1.30pm and we may see a weekly FX range in the space of a few minutes!
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
