Markets Awaiting FOMC (Weekly Review)

Last week the main currency pairs were influenced by expectations for the the US Federal Reserve to lower interest rate, by results of the European Central Bank meeting and comments by President Mario Draghi, as well as by the election of Boris Johnson for the prime minister of Great Britain. This event only added some negative to the British pound, since everyone knows Johnson’s intention to complete the Brexit procedure, with or without the deal with the EU. Despite this, the fall of the GBP looks somewhat hypertrophied, so its sellers should be extremely careful.

The European Central Bank, contrary to the market expectations, put no additionnal incentive measures, and the tone of Mario Draghi’s comments was not too “dovish”, and the EUR responded to the event by trying to develop an upward trend against the USD, but this attempt was not successful. The ECB leaves the door open for expanding stimulus measures, and even if the Fed lowers the interest rate by 0.25%, the USD position seems to be stronger than the EUR position.

The Fed meeting will be held this week, and in anticipation of it, volatility in the foreign exchange market remains very low, as is the probability of its surge even after the FOMC meeting results. Lowering the rate by 50 basis points could trigger a sell-off of the USD, but in the case of a 25-point decrease in large-scale movements, we should hardly expect it, as well as after the release of data on the US labor market. Prior to these events, the GBP and the EUR may remain under pressure.

Schedule for this week:

Monday, July 29
08:30 GMT – United Kingdom. Mortgage Approvals;
08:30 GMT - United Kingdom. Consumer Credit.

Tuesday, July 30
23:30 GMT - Japan. Unemployment Rate;
23:50 GMT - Japan. Industrial Production;
02:00 GMT - Japan. Bank of Japan Interest Rate Decision;
02:00 GMT - Japan. Bank of Japan Press Conference and Monetary Policy Statement;
06:00 GMT - Japan. Bank of Japan Press Conference;
09:00 GMT - Eurozone. Consumer Confidence;
09:00 GMT - Eurozone. Business Climate Indicator;
12:00 GMT - Germany. Harmonised Index of Consumer Prices (HICP);
12:00 GMT - Germany. Consumer Price Index (CPI);
12:30 GMT - USA. Personal Spending/Income;
12:30 GMT - USA. Core PCE Price Index;
13:00 GMT - USA. S&P/CaseShiller House Price Index;
14:00 GMT - USA. Pending Home Sales;
14:00 GMT - USA. Consumer Confidence.

Wednesday, July 31
01:30 GMT - Australia. Consumer Price Index (CPI);
01:30 GMT - Australia. Weighted Mean Consumer Price Index (CPI);
07:55 GMT - Germany. Unemployment Rate;
09:00 GMT - Eurozone. Consumer Price Index (CPI);
09:00 GMT - Eurozone. Core Consumer Price Index (CPI);
09:00 GMT - Eurozone. GDP;
12:15 GMT - USA. ADP Nonfarm Employment Change;
12:30 GMT - Canada. GDP;
18:00 GMT - USA. Fed Interest Rate Decision;
18:00 GMT - USA. Federal Open Market Committee (FOMC) Statement;
18:30 GMT - USA. Federal Open Market Committee (FOMC) Press Conference.

Thursday, August 1
22:30 GMT - Australia. AiG Manufacturing Index;
23:00 GMT - Australia. Commonwealth Bank Manufacturing PMI;
01:45 GMT - PRC. Caixin Manufacturing Purchasing Managers Index (PMI);
07:00 GMT - Germany. Markit Manufacturing Purchasing Managers Index (PMI);
11:00 GMT - United Kingdom. Bank of England Interest Rate Decision;
11:00 GMT - United Kingdom. Bank of England Meeting Minutes; 
11:30 GMT - United Kingdom. Bank of England Governor Carney Speaks;
12:30 GMT - USA. Initial Jobless Claims;
13:30 GMT - Canada. Manufacturing Purchasing Managers Index (PMI);
13:45 GMT - USA. Markit Manufacturing Purchasing Managers Index (PMI);
14:00 GMT - USA. ISM Manufacturing Purchasing Managers Index (PMI).

Friday, August 2
23:50 GMT - Japan. Monetary Policy Meeting Minutes;
01:30 GMT - Australia. Retail Sales;
08:30 GMT - United Kingdom. Construction Purchasing Managers Index (PMI);
09:00 GMT - Eurozone. Retail Sales;
12:30 GMT - USA. Trade Balance;
12:30 GMT - USA. Unemployment Rate;
12:30 GMT - USA. Nonfarm Payrolls;
12:30 GMT - USA. Average Hourly Earnings;
13:00 GMT - USA. Factory Orders.

Author: Anthony Porter, IAFT Analyst