This week, investors’ focus will be on the final decisions on the monetary policy of the Central Banks of Japan, Great Britain, Russia and of course the US Fed. Market participants keep in mind the possibility of some new statements on monetary rates in the nearest future, but also admit that they may not follow. Also, the attention will be focused on the publication of economic statistics. Let’s highlight the most significant of them!
This week, we need to pay attention to data on consumer inflation in the Eurozone, Britain, and Canada, the updated GDP figures for the 2nd quarter of New Zealand and its employment level. Also in focus will be meetings of the Central Banks of Japan, the Bank of England, and Russia on monetary policy.
From American statistics, the most important figures will be the number of applications for unemployment benefits, the number of building permits issued, retail sales, and the value of the index of manufacturing activity from the Federal Reserve Bank of Philadelphia. Besides, it is necessary to monitor the situation with the production of the COVID-19 vaccine. The topic of coronavirus infection remains the leading one in investor sentiment. The University of Oxford and AstraZeneca announced the third phase of vaccine trials’ resumption, which could spur demand for risky assets.
What can we expect this week?
I believe that the outcome of the US Fed’s meeting on monetary policy will not bring any changes. Neither the regulator nor its head Jerome Powell will most likely not to inform investors of something new and significant, which means that market participants will continue to focus on the emerging economic statistics. Of course, the main news will be the latest numbers of jobless claims, and if they show a more significant decline than expected, the dollar will intensify the decline in foreign exchange markets.
Regarding the results of the meetings of the Central Banks of Japan and Great Britain, we expect the preservation of the previous monetary exchange rate both in terms of the level of interest rates and the volume of stimulating measures. In contrast, the Central Bank of the Russian Federation may lower the key interest rate to 4.0% from 4.25%, which will be harmful to the inflow of external capital and the ruble exchange rate.
Regarding the dynamics of the pound and euro, we believe that the British currency will remain under pressure in the wake of the situation around Brexit and the still existing possibility of expansion of stimulus measures by the local regulator against the backdrop of the weakness of the British economy. However, before the meeting of the Bank of England, it may consolidate in a narrow range. The euro most likely will be supported by the optimism received following the last week’s ECB meeting and the demand for risky assets. We expect a similar picture from the movement of commodity currencies.
thoughts and Conclusions
This week will be full of events that will have a noticeable impact on the Forex market dynamics. We believe that the dollar will resume its downward movement against all major currencies.