Bank of England in Focus This Week

After the pullback in the U.S. equity markets at the end of  last week, the road ahead is full of important data to consider. Besides Fed’s Powell’s testimony on Tuesday and Wednesday, two central banks will announce their monetary policy decision – Bank of Japan (BOJ) and Bank of England (BOE). 

Out of the two, BOE on Thursday is likely to create more volatility on the currency market due to the expected increase in the asset purchase program (i.e. quantitative easing). As such, the GBP, one of the most volatile currencies part of the FX dashboard, is expected to experience higher volatility than normal.

Relevant Economic Data This Week

Claimant Count in the United Kingdom will “warm-up” GBP traders for the big BOE event on Thursday. The unemployment rate in the kingdom is expected to rise, something already priced in considering we live in the times of the coronavirus crisis.

Later that day, the Retail Sales in the United States tells us the shape of the U.S. consumer. As always, the devil hides in the details, so be prepared to read the full report before jumping on the long or short side of the USD.

The Canadian CPI (i.e. inflation) and New Zealand GDP are due on Wednesdays. Both are tier-one data that could potentially move the CAD and NZD pairs, and this week may be no different. The forecast is that the Canadian CPI will rise by 0.8% while the New Zealand GDP is expected to shrink by 1%. The Canadian Retail Sales will close the week in terms of tier-one economic releases, but there is more to this week that meets the eye.

Apart from the economic data, three central banks will release their monetary policy statements – BOJ, Swiss National Bank (SNB), and BOE. They are all expected to have an expansionary policy, making it difficult to interpret the impact on the currencies in their jurisdiction.

As always, the key driver is the USD. Fed’s Chairman Jerome Powell will testify this week in front of the Senate Banking Committee and the House Financials Services Committee. While both hearings are important, the first one (due on Tuesday) usually creates higher volatility than the second hearing.

Late on Friday, Powell will hold another speech – this time, he will participate in a virtual panel discussion at a Youngstown community event in Ohio. Market participants know that, whenever the Fed’s Chair speaks, the markets might move significantly.

It means that the trading week ahead is long and will not end until late Friday Powell’s speech ends.

Buckle up for a bumpy road ahead!

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