Last week the Japanese authorities intervened in FX markets to strengthen the Yen. There was also some natural adjustment lower for USDJPY as US ISM data (both manufacturing and services) moved into contraction and US employment numbers disappointed after several strong prints.
Swiss inflation eked a little higher and both the US and Norway kept their interest rates on hold. It was a truly bumper week with FX markets experiencing considerable volatility after having stagnated for most of this year.
This week, in a quiet week for data the standout releases are UK GDP, and interest rate decisions from the Reserve Bank of Australia, the Bank of England and the Swedish Riksbank.
On Tuesday economic consensus is for the RBA to keep its interest rate on hold at 4.35%. Australian inflation fell in the first quarter but is still above 3%. Although inflation is trending lower, this will probably be the main concern for the RBA. Australian employment numbers for March were slightly better than expected. I would be surprised if the RBA cuts.
On Wednesday the Swedish Riksbank is expected to keep its interest rate on hold at 4%. Swedish inflation is currently running at 4.1% (March) and unemployment is 9.2%.
Thursday, and it’s the turn of the Bank of England. March headline inflation fell to 3.2% (y.o.y). UK unemployment currently stands at 4.2%. The UK is widely expected to keep its interest rate at 5.25%. Keep an eye out for the voting of the monetary policy committee. Last month it was 9-0 for unchanged. Will the first doves appear this time around?
On Friday, UK GDP numbers will be released with consensus for a slight lift in the 3-month average figure to 0.4%. Any positive improvement will delight the beleaguered governing Conservative party. Politically speaking, they will be hoping for world-wide inflation to fall. Cutting interest rates before a general election and spinning that positively is perhaps their last chance of retaining power.
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
