FX market braces for hectic week of central bank meetings

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30 April 2019


This week is shaping up to be a potentially very volatile one in the FX markets with a host of major announcements set for release, particularly in the second half of the week.

ednesday evening’s Federal Reserve monetary policy announcement will, as always, be under the microscope as investors look for clues as to the timing and direction of the next US rate move. With no economic projections to be released, we think that the bank’s message could be mostly unchanged from the March statement. We do, however, think there is a risk of a tweak in the wording surrounding inflation given recent soft data, which could present itself as a downside risk to the US Dollar.

Then, on Thursday, the Bank of England will be announcing its own policy decision. Again, the bank is unlikely to change too much from its previous message, although it may flag increased risks to growth following the elongation of the Brexit deadline. That being said, there has been speculation that one of the more hawkish members could vote for an immediate rate hike, namely Michael Saunders, which would undoubtedly be positive for Sterling.

Amid the cohort of central bank news, the market will also have one eye on Friday’s US labour report. Economists are eyeing another solid nonfarm payrolls numbers around the 180k mark.

Sterling gains on ‘constructive’ cross party Brexit talks

The Pound crept upwards to a one week high against the US Dollar during London trading this morning after the BBC reported that talks between Prime Minister Theresa May and Labour were ‘positive and productive’. Labour’s shadow environment secretary Sue Hayman reportedly stated that the discussions had been ‘really constructive’, just about the first good news the market has received out of the talks since they began a couple of weeks ago.

The Euro also edged back above the 1.12 level against the US Dollar for the first time since Wednesday after this morning’s Eurozone GDP numbers. The data showed that the Euro-area economy expanded by a better-than-expected 0.4% quarter-on-quarter and by 1.2% on a year previous. This is considerably faster than the end of 2018, suggesting that fears over a broad slowdown in the bloc’s economy could be somewhat exaggerated.

Given the time lag associated with the GDP numbers, this week’s inflation release could prove even more of a market mover for the Euro. This afternoon’s German inflation numbers, expected to show an acceleration in price growth in April, is generally a decent barometer for the Euro-wide number, set for release on Friday.