The U.S. GDP announcement for the first quarter of 2009 is slated for release 29 April 2009 at 12:30 PM GMT (10:30 PM Canberra time) and is widely expected to contract somewhere between −4.0% and −5.0%. Although economic conditions have not improved significantly between 1Q2009 and 4Q2008, contractions in such categories as consumer spending and exports have at least slowed recently and are therefore anticipated to take less of a negative bite from the final reckoning. It’s possible that exports, which rebounded surprisingly in February, could even post a positive contribution.

Although risk aversion has eased, with both the VIX volatility index and the TED spread shrinking, and although EUR/USD appears to have decoupled at least partially from U.S. stock indices, fear remains a driving force within currency trading. The U.S. dollar retains its dichotomous position: a better than expected GDP release could see USD depreciation as investors feel more secure and move their funds to seek greater returns in higher-yielding commodity currencies; a worse than expected release could see USD appreciation as investors seek safety for their capital. A release in line with expectations could see little market reaction.

Complicating this trading opportunity is the FOMC rate decision, slated for release on the same day at 6:15 PM GMT (Canberra time 4:15 AM on Thursday, 30 April). Although no change is expected in the current interest rate of 0.0–0.25%, it is possible although not likely the Fed will intensify their quantitative easing measures already in place or initiate new ones. Should this happen, a depreciation of USD, in particular against the Euro, Japanese yen, Swiss franc, and pound sterling, is highly likely, with the immediate movement expected to be both sharp and dramatic. This scenario holds the greatest prospect for large price action movements and therefore profitable trades.

Forex traders are reminded that movements prompted by such official actions as QE or, in the case of the SNB, direct forex intervention, tend to be short-lived unless reinforced at regular intervals by verbal intervention. Of note, the spike in EUR/USD on 18 March, at the Fed’s initial announcement of QE, has been unwound for the most part and the market has returned the currency pair’s price to its previous level of 1.3000 to 1.3100.

The final monkey wrench in this trading scenario is the RBNZ rate decision, due for release at 9:00 PM GMT (Canberra time 7:00 AM on April 30). The market widely expects a rate cut of 50 basis points although a case can be made for a smaller one. However, even more important than the actual rate decision is the Monetary Policy Statement, which sent mixed signals in March, implying the easing cycle could be approaching its end, and pushed long-term retail rates, and NZD/USD, higher rather than the reverse.

The forex market will be looking for a statement from the RBNZ regarding keeping the OCR low for an extended period of time, such as was undertaken by the Bank of Canada in their most recent rate decision. In such a scenario, look for volatility and possible depreciation in NZD/USD, in tune with the earlier U.S. announcements.