By Ben Robson
This week promises to be exciting as there are several economic announcements as well as news conferences that may give us some useful pointers for our trading strategies.
Straight off the bat on Monday, the Eurozone delivers its inflation number expected at 2.0% (Y.o.Y) for August. Nothing too extraordinary in trading terms, with Eurozone interest rates expected to stay on hold until the middle of next year. ECB President Draghi speaks on Wednesday lunchtime in Berlin, which may cause a little price volatility in the Euro.
The Reserve Bank of Australia will release minutes of its latest interest rate policy meeting on Tuesday. This, to me is far more interesting, especially for traders of AUDUSD. And during the week, there are some potential cross currency trading opportunities in both AUDNZD and AUDCAD. In recent days, the data from Australia has been notably stronger, especially from a growth perspective and for employment creation. Whilst the tone of the minutes is expected to be dovish, any hawkish sentiment will be seen as bullish for the Australian dollar. New Zealand releases Q2 (Y.o.Y) GDP on Wednesday which is expected lower at 2.5%. A weak GDP print may push the Australian dollar higher in the AUDNZD currency pair. Canada releases both its retail sales and CPI on Friday. CPI is the one to watch out for and is expected at 2.9% (Y.o.Y) for August. With both Australian and Canadian interest rates at 1.5% and no preferential interest rate carry for either currency, a straight forward analysis of the two countries’ relative prospects for growth and inflation will give clues as to who raises interest rates first. I’m plugging for Australia! Readers should obviously do their own analysis.
On Wednesday, The UK delivers its inflation report (Y.o.Y) for August expected at 2.4%. There’s a potential for an upward surprise here, based on the weakness of the British Pound over the last few weeks. GBPUSD has been reacting to general USD strength, snippets of hope from Brexit negotiations, political infighting, and now the Bank of England governor warning of potential interest rate hikes in the case of a Brexit no-deal. Timing a GBP recovery is proving difficult for many.
Japan delivers its interest rate decision on Wednesday, expected unchanged at negative 0.1% and Switzerland delivers its interest rate announcement on Thursday, also expected unchanged at negative 0.75%. Of note is Japanese CPI, late on Thursday night/early Friday morning (Y.o.Y) for August which might beat expectations of 0.9%. Japan posted a very decent GDP number last week and is a currency to watch.
Of course, a week can never be complete without a glimpse of what’s happening in the US White House. Towards the end of last week, Mr. Trump is rumored to have instructed aides to go ahead and proceed with tariffs on about $200 billion of Chinese goods despite the US Treasury seeking further talks with Beijing. Potentially we will see fallout from this in reactionary tariffs. There are risks for emerging markets and also possible contagion spreading to western equity markets. Emerging market sell-offs tend to lead to weaker currencies in those markets being affected. Remarkably, safe haven trades in gold, yen and the Vix are less expensive than last week. With the US 10-year Bond Yield trading at 3.0% again, we are more or less in correction territory and people should be prudent about their risks.
Good Luck and good trading!
This Article was prepared and accomplished by Mr. Ben Robson in his personal capacity. The opinions expressed in this article are Ben’s own and do not reflect the view of EGM Securities.