Thanksgiving week is here, and the banks in the United States are closed next Friday. Therefore, this is a shorter week than usual, but a special one, at least for the currency market. While not a rule of thumb, there is rarely a trend reversal on major currency pairs during the Thanksgiving week.
Despite being a short week, there are some important events to consider. The week already started with a “bang,” as AstraZeneca, the British pharmaceutical company, announced that its vaccine against the COVID-19 virus has a 70% efficacy.
GBP and EUR In Focus This Week
Later today, the monetary policy report hearings in the U.K. will create some volatility on the GBP pairs. This is a quarterly report, and the Bank of England explains its stance on the monetary policy and the steps it plans to take further.
One day later, the Autumn Forecast Statement will complete the picture on the U.K. economy. What is interesting here is that this report shows the Treasury’s view about the economy, and not the Bank of England. Therefore, it might differ slightly, so the GBP pairs are vulnerable to higher volatility than usual.
On Wednesday, the ECB Financial Stability Review is of extreme importance for Euro traders. This is a report that assesses the conditions in the financial system and the risks to financial stability. Any dovish tone should weigh on the Euro pairs.
Speaking of the Euro pairs, the EUR continues to be one of the stronger currencies on the F.X. dashboard. Despite the ECB constantly intervening to stress the fact that the currency’s strength is not welcomed by the central bank, the EURUS trades close to the 1.19 level. If the pair does not reverse Monday or Tuesday, the chances are that it will try above 1.19, given the bias that exists during the Thanksgiving week.
The FOMC Minutes and the Preliminary GDP are the most important events out of the United States. Considering the direct correlation between the stock market and the U.S. dollar, the only plausible way for the dollar to get stronger comes from lower equity prices. If, on the other hand, the equities will make new highs, the USD will likely follow and take another step lower.
All in all, expect a slow week, especially in its second half. As such, the market’s volatility is expected to decline already from Thursday.