The week ahead is all about the Fed’s Wednesday decision. Sure, other central banks are scheduled to release their interest rate decision, too. Also, important economic data hits the wires as we come closer to the December holidays. However, it all pales in front of Wednesday’s FOMC Statement and press conference that follows.
This is the event financial markets waited for some time now. In fact, it is the only event left in the year that may still bring some volatility in the market. That is, if we exclude the ongoing uncertainty regarding Brexit, but that is not a USD driven event.
No Important Events Monday and Tuesday
Beside Brexit related news that might influence the GBP pairs in the first two trading days of the year, there is no other economic release scheduled today and tomorrow that may create volatility on the markets. Even if it would have been, the market participants’ focus would still remain on the Fed’s decision on Wednesday.
Regardless of what the currency pairs one is trading, when the USD volatility increases, the entire FX market comes to life.
FOMC Statement and Press Conference on Wednesday
We can say that the main events for the week ahead start on Wednesday. The Euro area PMIs, the UK PMIs, the OPEC Meeting, or the U.S. Retail Sales – they will all warm-up markets until the Fed’s decision.
The decision and the statement are mostly priced in – the Fed is on course to increase the Quantitative Easing (QE) program again. However, when it comes to the Fed during a crisis, all traders should expect the unexpected.
This is particularly true this time as the U.S. economic recovery stalls. Faced with a renewed increase in unemployment, as suggested by the latest initial jobless claims data, the Fed may decide to do more to ease financial conditions. Speaking of financial conditions, they were never so loose as they are today – and yet the market expects more; probably, it will get more.
SNB and BOE To Watch
As if Brexit is not enough for the GBP traders, the Bank of England decides its monetary policy this Thursday. A few hours earlier, the SNB did the same. While the market does not anticipate anything new, we should never underestimate the possibility of increased volatility during central banks announcements.