We’re beginning the month busy with not one, not two, however THREE central financial institution selections developing throughout NFP week.
However earlier than that, ICYMI, I’ve written a fast recap of the market themes that pushed foreign money pairs round final week. Test it!
And now for the main occasions which may transfer the main currencies round within the subsequent couple of days:
Main Financial Occasions:
RBA’s coverage choice (Could 3, 4:30 am GMT) – The Reserve Financial institution of Australia (RBA) stunned AUD bulls final month when it eliminated the “ready to be affected person” bit from its assertion and hinted that it could be extra open to elevating charges earlier than members initially deliberate.
With inflation hitting its highest ranges for the reason that early 2000s and unemployment chillin’ at document lows, markets see RBA elevating its charges by 25 foundation factors this week.
Merchants may also search for ahead steering to get clues on RBA’s tightening schedule and trajectory for the remainder of the 12 months.
FOMC assertion (Could 4, 6:00 pm GMT) – After weeks of hyping, markets broadly anticipate the Fed to boost its rates of interest by 50 foundation factors to round 1.00% for the month of Could.
Eyes may also be on the Fed’s $9 trillion asset portfolio, which members have signaled they need to shrink by $95 billion a month within the March assembly minutes.
This week’s strikes are probably priced in, so the volatility might come when Powell sheds gentle on the pace and trajectory of the Fed’s rate of interest hikes and portfolio shrinking actions for the remainder of the 12 months.
BOE’s coverage choice (Could 5, 11:00 am GMT) – As anticipated, the Financial institution of England (BOE) raised its rates of interest by 25 foundation factors to a pre-COVID fee of 0.75% in March.
This week, merchants anticipate BOE to boost its charges for a fourth consecutive time to 1.00%. Members will probably flip much less hawkish, although, with at the least one fee hike dissenter and different members expressing considerations over excessive inflation, the Russia-Ukraine conflict, and international financial development.
U.S. NFP reviews (Could 6, 12:30 pm GMT) – Uncle Sam’s labor market tightened additional in March with a internet of 431K jobs added whereas the unemployment fee dipped from 3.8% to three.6%.
Markets anticipate a continuation of the hiring momentum with 380K – 415K jobs added in April whereas common hourly earnings edge greater from 0.4% to 0.5% and the unemployment fee stays at 3.6%.
Foreign exchange Setup of the Week: GBP/USD
The Fed and BOE’s occasions acquired me taking a look at GBP/USD this week!
As you’ll be able to see, Cable has fallen sharply within the second half of April after breaking a weeks-long consolidation above the 1.3000 psychological space.
GBP/USD has discovered some assist, nonetheless, and is now hanging out on the 1.2600 zone close to the 100 SMA and Fibonacci retracement ranges on the 1-hour chart.
Can the bulls preserve a bullish momentum? Or will USD bulls and GBP bears quickly lengthen GBP/USD’s downtrend?
The Fed’s anticipated 50-basis level fee hike in addition to its plans to tighten its steadiness sheet might deal the primary blow to GBP/USD’s pullback. The pair might dip to its April lows earlier than we might even say “pips!”
BOE’s occasion most likely received’t assist, both. Not solely is the 25-basis level fee hike already anticipated, however members will probably spotlight their considerations over excessive inflation and its influence on client spending and the U.Okay.’s development.
Until we see a buy-the-rumor, sell-the-news state of affairs, or we see surprises from the Fed and/or BOE, then the percentages favor extra losses for GBP/USD. Yikes!