FX market this week: Central Bank monetary policy meetings (RBA and BOE) among top-tier data/events to keep forex traders busy.

Again Central bank meetings are likely to be the big focus point for the forex traders in this week (Feb 04-08) along with other top-tier macro data points across the globe. On top of these, headlines on US-China trade talks and latest developments of Brexit are likely to keep investors busy.

Overall, this week is expected full of action with the G10 currencies, few of them namely AUD, GBP, and NZD. Near-term volatility woes will be dictated by the headlines of US-China trade talks and RBA outlook with USDJPY and AUDUSD are in the spotlight.

In Asia, this morning Australia Building Approvals, Dec 2018 due, not a market mover. Turning to Europe and U.S, it will be light headlight sessions and traders waiting for RBA policy meeting and Retail sales and Trade data (Tue).

In January 2019, the U.S Dollar liberated against the G10 counterparts with the US, 10Yr Yields closed at 2.63, the lowest level in a month. The Australian dollar and the pound lead with 3.50% each and followed by Kiwi, Loonie and Norwegian Krone with 3.00% each.

The following are the top-tier data releases and events that will keep forex traders busy:

  • Mon: Building Approvals, Australia, December 2018, EA PPI and Italy Prelim CPI
  • Tue: International Trade in Goods and Services, Australia, December 2018, Retail Trade, Australia, December 2018, RBA monetary policy meeting, EA Services PMI survey, ISM Non-manufacturing PMI.
  • Wed: Speech by Philip Lowe, Governor, Sydney, Germany Factory orders, US Trade Balance and NZ Q4 labor market statistics.
  • Mega Thu: Fed Chairman Powell due to speak in Washington DC, EU Economic forecast and BOE monetary policy summary.
  • Fri: RBA Statement on Monetary Policy< Fed member Bullard speaks, German Trade balance, Italy IP and Canada jobs data.

Reserve Bank of Australia and Bank of England meetings:

This week AUDUSD, GBPAUD, and GBPUSD will react to the upcoming Central bank meeting, especially GBPAUD. We expect both the banks keep the interest rates steady. Given the recent Central Banks dovish turn the Fed and ECB, we focus more on RBA’s language.

The Reserve Bank of Australia monetary policy meeting due on Feb 05, 2.00pm (AEST). It will be an uneventful as the market participants expect to keep the policy setting s steady. Recently printed Q4 CPI data beat analysts expectations for the first time in the past two years, which is to a surprise the market. The data rose 0.5% compared to 0.4% in Q3. On an annual basis, rose 1.8% vs. 1.9% Q3.

Turning to the Bank of England monetary policy meeting we expect the bank to keep rates steady. Ahead of the Brexit deadline we expect the MPC is in no rush to hike the rates until clouds cleared over Brexit outcome.
The bank is likely to wait until a transition period is secured before moving again. This makes May the most likely date for a next rate hike, according to Moody’s Analytics.

Chart of the week: GBPAUD
The cross has been consolidating in a tight range between 1.8510-1.7610. Ahead of the RBA and BOE monetary policy meetings, we expect the price action unlikely to change the range in the near term, but at the higher time frame, the downside prevails as long as 1.1825 is resistance (weekly basis).

For a trading purpose, a move above 1.8110 needed to rally further towards 1.8190/1.8220 and 1.8290. Furthermore, a daily close above 1.8300 could offer further upside towards 1.8440 and 1.8500.
For bears, a downside break below 1.7850 could pave all the way to 1.7750 and 1.7620 initially and followed by 1.7500.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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