Forex trading market jittering between risk aversion and normality
With most currency pairs still stuck within summer trading ranges and the forex trading market jittering between risk aversion and normality, a plethora of fundamental announcements this week could shake things up a bit. These event risks include:
U.K. unemployment data, scheduled for release Wednesday, 12 August, 8:30 AM GMT (6:30 PM Canberra time). Jobless claims are expected to rise by 28.0K, the claimant count to 4.9%, and the ILO unemployment rate to 7.7%. The pound sterling is already under pressure by the BoE’s surprise increase to their quantitative easing programme, which some analysts are seeing as a “stealth” pound depreciation strategy to assist U.K. exporters. Should the unemployment figures surprise to the downside, this would increase the pressure on GBP, particularly against USD, EUR, and JPY, while a surprise to the upside may partially unravel the BoE’s satisfactory results to date.
The BoE quarterly inflation report is scheduled for release one hour later. Commodities prices have risen recently and this could influence the BoE’s view of inflationary pressures. Any worries on their part could also unravel GBP losses.
The U.S. FOMC interest rate decision will be announced Wednesday, 6:15 PM GMT (Canberra time Thursday, 13 August, 4:15 AM). No one seriously expects any alteration in U.S. interest rates, nor in the current quantitative easing programme; however, markets are poised awaiting the statement on monetary policy. Should the Fed cite “upside risks to inflation” stemming from rising commodities prices, including crude oil and sugar, financial markets will read that as penciling in a future rate hike and USD crosses could go wild.
Should that little phrase not be included in the statement, it is possible the standard risk aversion trading rules could apply, with investors abandoning growth currencies such as AUD, NZD, CAD, and the anti-dollar EUR, for safe-haven currencies such as JPY, CHF, and USD. Such a scenario holds downside potential for USD/JPY and AUD/JPY, in particular.
Eurozone 2Q2009 GDP is scheduled for release Thursday, 13 August, 9:00 AM GMT (7:00 PM Canberra time). Although consensus is divided, the general expectation is for a contraction of −0.5% q/q and −5.1% y/y. If these figures surprise to the upside that would be EUR bullish; to the downside of course would be EUR bearish.
U.S. advance retail sales for July, to be released Thursday, 12:30 PM GMT (10:30 PM Canberra time). With the success of the “cash for clunkers” scheme, markets are predicting a rise of 0.5%, 0.1% ex-autos.
Finally, CPI data for both the Eurozone and the U.S. are slated for release Friday, 14 August, at 9:00 AM and 12:30 PM GMT, respectively (7:30 PM and 10:30 PM Canberra time). Both are expected to drop slightly; however, the key to trading these releases may be the comparative figures. Look for an edge on the currency with the smaller decline, as higher inflationary pressures will put pressure on the central bank to increase interest rates, particularly the inflation-phobic ECB.
It’s early days yet, but it appears the forex trading market is stabilising from risk aversion mode and returning to seeking appropriate comparative values for currency pairs. The weeks to come could see some stronger trending movements as fundamental data show which major will be first out of that economic starting gate.
Trading notes 11 August 2009
With most currency pairs still stuck within summer trading ranges and the forex trading market jittering between risk aversion and normality, a plethora of fundamental announcements this week could shake things up a bit. These event risks include:
U.K. unemployment data, scheduled for release Wednesday, 12 August, 8:30 AM GMT (6:30 PM Canberra time). Jobless claims are expected to rise by 28.0K, the claimant count to 4.9%, and the ILO unemployment rate to 7.7%. The pound sterling is already under pressure by the BoE’s surprise increase to their quantitative easing programme, which some analysts are seeing as a “stealth” pound depreciation strategy to assist U.K. exporters. Should the unemployment figures surprise to the downside, this would increase the pressure on GBP, particularly against USD, EUR, and JPY, while a surprise to the upside may partially unravel the BoE’s satisfactory results to date.
The BoE quarterly inflation report is scheduled for release one hour later. Commodities prices have risen recently and this could influence the BoE’s view of inflationary pressures. Any worries on their part could also unravel GBP losses.
The U.S. FOMC interest rate decision will be announced Wednesday, 6:15 PM GMT (Canberra time Thursday, 13 August, 4:15 AM). No one seriously expects any alteration in U.S. interest rates, nor in the current quantitative easing programme; however, markets are poised awaiting the statement on monetary policy. Should the Fed cite “upside risks to inflation” stemming from rising commodities prices, including crude oil and sugar, financial markets will read that as penciling in a future rate hike and USD crosses could go wild.
Should that little phrase not be included in the statement, it is possible the standard risk aversion trading rules could apply, with investors abandoning growth currencies such as AUD, NZD, CAD, and the anti-dollar EUR, for safe-haven currencies such as JPY, CHF, and USD. Such a scenario holds downside potential for USD/JPY and AUD/JPY, in particular.
Eurozone 2Q2009 GDP is scheduled for release Thursday, 13 August, 9:00 AM GMT (7:00 PM Canberra time). Although consensus is divided, the general expectation is for a contraction of −0.5% q/q and −5.1% y/y. If these figures surprise to the upside that would be EUR bullish; to the downside of course would be EUR bearish.
U.S. advance retail sales for July, to be released Thursday, 12:30 PM GMT (10:30 PM Canberra time). With the success of the “cash for clunkers” scheme, markets are predicting a rise of 0.5%, 0.1% ex-autos.
Finally, CPI data for both the Eurozone and the U.S. are slated for release Friday, 14 August, at 9:00 AM and 12:30 PM GMT, respectively (7:30 PM and 10:30 PM Canberra time). Both are expected to drop slightly; however, the key to trading these releases may be the comparative figures. Look for an edge on the currency with the smaller decline, as higher inflationary pressures will put pressure on the central bank to increase interest rates, particularly the inflation-phobic ECB.
It’s early days yet, but it appears the forex trading market is stabilising from risk aversion mode and returning to seeking appropriate comparative values for currency pairs. The weeks to come could see some stronger trending movements as fundamental data show which major will be first out of that economic starting gate.
