We’re beginning the month busy with not one, not two, however THREE central financial institution selections arising throughout NFP week.
However earlier than that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Examine it!
And now for the key occasions which may transfer the key currencies round within the subsequent couple of days:
Main Financial Occasions:
RBA’s coverage resolution (Could 3, 4:30 am GMT) – The Reserve Financial institution of Australia (RBA) stunned AUD bulls final month when it removed the “prepared to be patient” bit from its statement and hinted that it might be extra open to elevating charges prior to members initially deliberate.
With inflation hitting its highest ranges for the reason that early 2000s and unemployment chillin’ at document lows, markets see RBA elevating its charges by 25 foundation factors this week.
Merchants will even search for ahead steering to get clues on RBA’s tightening schedule and trajectory for the remainder of the yr.
FOMC assertion (Could 4, 6:00 pm GMT) – After weeks of hyping, markets extensively anticipate the Fed to boost its rates of interest by 50 foundation factors to round 1.00% for the month of Could.
Eyes will even be on the Fed’s $9 trillion asset portfolio, which members have signaled they wish to shrink by $95 billion a month within the March assembly minutes.
This week’s strikes are possible priced in, so the volatility might come when Powell sheds mild on the pace and trajectory of the Fed’s rate of interest hikes and portfolio shrinking actions for the remainder of the yr.
BOE’s coverage resolution (Could 5, 11:00 am GMT) – As anticipated, the Financial institution of England (BOE) raised its rates of interest by 25 foundation factors to a pre-COVID charge of 0.75% in March.
This week, merchants anticipate BOE to boost its charges for a fourth consecutive time to 1.00%. Members will possible flip much less hawkish, although, with no less than one charge hike dissenter and different members expressing considerations over excessive inflation, the Russia-Ukraine battle, and international financial progress.
U.S. NFP experiences (Could 6, 12:30 pm GMT) – Uncle Sam’s labor market tightened additional in March with a internet of 431Ok jobs added whereas the unemployment charge dipped from 3.8% to three.6%.
Markets anticipate a continuation of the hiring momentum with 380Ok – 415Ok jobs added in April whereas common hourly earnings edge increased from 0.4% to 0.5% and the unemployment charge stays at 3.6%.
Foreign exchange Setup of the Week: GBP/USD
The Fed and BOE’s occasions obtained me GBP/USD this week!
As you may see, Cable has fallen sharply within the second half of April after breaking a weeks-long consolidation above the 1.3000 psychological space.
GBP/USD has discovered some assist, nevertheless, and is now hanging out on the 1.2600 zone close to the 100 SMA and Fibonacci retracement ranges on the 1-hour chart.
Can the bulls preserve a bullish momentum? Or will USD bulls and GBP bears quickly prolong GBP/USD’s downtrend?
The Fed’s anticipated 50-basis level charge hike in addition to its plans to tighten its steadiness sheet may deal the primary blow to GBP/USD’s pullback. The pair may dip to its April lows earlier than we may even say “pips!”
BOE’s occasion in all probability received’t assist, both. Not solely is the 25-basis level charge hike already anticipated, however members will possible spotlight their considerations over excessive inflation and its influence on client spending and the U.Ok.’s progress.
Until we see a buy-the-rumor, sell-the-news state of affairs, or we see surprises from the Fed and/or BOE, then the chances favor extra losses for GBP/USD. Yikes!