Market Review: Federal Open Market Committee Interest Rate Decision
Economic calendar (highest volatility): 19th March– 23th March 2018:
Timezone: (GMT -5:00) Eastern Time (U.S & Canada), Bogota, Lima
In the previous week, the United States (U.S) Consumer Price Index (CPI) met expectations with the Core CPI coming in at 0.2%. While the Core CPI met forecast, the 'normal paced' country’s inflation rate suggest for a more gradual Federal Open Market Committee (FOMC) Interest rate hike stance rather than an aggressive one as indicated by newly appointed Federal Reserve Governor, Jerome Powell. This comes in line with weaker U.S Dollar concerns due to U.S President Trump’s heavy protectionist stance on international trade. Meanwhile in regards to CPI growth in Europe, while Core CPI met forecast, yearly CPI slowed down at 1.1% against the market consensus of 1.2%, triggering some unwinding in long EUR positions.
On a related note, this week we are set to witness a potential Interest Rate hike out of the FOMC in regards to the American economy, easily setting this to be the main news to drive market volatility for the week. Markets are pricing in an increase of 25 basis points which would bring up the benchmark Fed Funds rate to 1.75%. While this anticipation has been heavily priced in by the markets, there are some other Interest Rate decisions which are set to take place this week which trigger U.S Dollar unwinding towards these country's favour if hawkish ques are presented on Interest Rates; both the Reserve Bank of New Zealand (RBNZ) and the Bank of England will be releasing their Interest Rate decisions as well this week. The other potential driver for volatility for the week stands to be the two-day G20 Meeting which takes place in Buenos Aires, Argentina with cryptocurrencies being one of the main items on the agenda. Recently, a few governments have hinted on the potential move towards 'government issued cryptocurrencies' with Venezuela being one of the first to issue. The G20 meet up this week could pave way for more of these issuances to take place ultimately, posing some form of downside risk on global fiat based currencies.
The GBP/USD can easily be crowned as one of 2018's star performer; the pair is seen to have recouped much of it's post-Brexit losses as indicated in the strong uptrend visible in the chart below. In the recent Bank of England (BoE) Interest Rate Decision meet up, the committee warned that akin to the U.S, the BoE may also raise Interest Rates faster than expected. This statement sparks some optimism for GBP/USD prices to move further upwards as we approach the BoE Interest Rate Decision week once again. The team at FintechFX views that at least the "buy on rumour" move seems to be holding strong for now as indicated by the well validated support line as shown in the chart below.
Formerly, the USD/CAD in regards to the chart below showed some pattern of a Wcykoff triggered sell-down. As formerly indicated, the Wyckoff sell move has since been reversed as the Canadian Gross Domestic Product (GDP) figures have fallen below expectation as of late. The stronger recent U.S Nonfarm Payrolls data have also brought about much USD strength as of late. Nonetheless, the team here at FintechFX view that the chart below shows some chance of a potential selldown to take place once again if the Canadian CPI data and Core Retail Sales data outweigh forecast at the end of this week.
Source (Charts): https://www.investing.com
Source (Economic Calendar): https://www.forexfactory.com/calendar.php
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