The week ahead is full of central bankers speaking at various events. Part of the forward guidance principle, central bankers’ communication is important to make sure financial market participants understand their message. ECB’s Lagarde already held one over the weekend.
Sometimes the market reacts in ways that central bankers cannot anticipate. For example, the EURUSD ascent to 1.20 in 2020 is not something that the ECB likes, but cannot do much about it. If we look at the financial conditions in the Euro area in 2020 and compare them with the ones in the United States, that market is right to send the EURUSD higher.
Before looking at the events and data for the week ahead, the name of the game in the developed markets remains quantitative easing (QE). The de-facto tool to fight the current economic recession, it is on every central bank’s program this year.
Events and Data for the Week
The week started with the Chinese GDP disappointing – the economy grew only 4.9% when compared to 5.5% in the third quarter. However, it is solid growth if we consider what happens in the rest of the world, and the positive Chinese data further supports the Australian dollar (AUD) on every dip.
Fed’s Powell speaks at the IMF’s annual meeting about digital currencies and cross-border payments. This should be interesting as central banks in various countries announced their intention to introduce digital currencies sooner rather than later.
Tuesday, the Reserve Bank of Australia (RBA) releases its minutes from the previous meeting. While important for the AUD, it is expected to be a non-event this time as the RBA changed nothing at the previous meeting.
Wednesday, the Canadian CPI will likely bring some volatility on the CAD pairs. Also, inflation is released in the United Kingdom the same day, only a few hours earlier.
Thursday, we have Bank of England’s Governor holding a speech at the annual Waterline Summit. The week closes on Friday with the PMI’s for the month from both the United Kingdom and the European Union.
Despite the events mentioned so far, the name of the game for financial markets remains the U.S. elections. For this reason, the chances are that the market will simply not move as expected, and ranges will likely dominate the price action. Caution is needed ahead of such an important event, and traders typically reduce the risk way ahead of it.