Last week several important economic updates influenced the Forex market. US preliminary GDP fell less than expected (0.6% actual vs. 0.7% forecast). Below you will find the key events to trade on during the week from August 29 to September 2.
Greenback approaches 16-month maximum
On Monday, the evergreen buck built on the previous week's profits and jumped to a 16-month maximum due to the fact that investors actually expect the Fed to keep tightening monetary policy, although the UK pound was still pressured against the backdrop of uncertainty over a Brexit agreement.
The major US bank has reaffirmed its plan to have interest rates lifted by up to 25 basis points already in December. What’s more, the bank is considering two extra rate lifts by mid-2019 justified by a firm economy as well as soaring wage pressures.
The US currency has also derived benefits from a broader move away from risky assets because of US-Sino trade clashes, China's economic deceleration, Brexit uncertainty, to say nothing of the everlasting conflict between Rome and the European bloc over Italy's plan for a big-spending budget as well as wide fiscal deficit.
Estimating the US dollar’s purchasing potential versus its primary rivals the USD index rallied by 0.1% ending up with 97.02, which is below its 16-month maximum of 97.2 reached on October 31. What’s more, the USD index has managed to soar four weeks in row, soaring by 0.4% the previous week.
Against the Japanese yen the evergreen buck rallied by 0.1% hitting 113.98, which is close to a 6-week minimum of 114.08. The US currency has been preferred over the Japanese rival due to the diverging monetary policies of the Fed as well as the Bank of Japan.
While the key US financial institution is on track to raise interest rates, Japan’s major bank is generally anticipated to keep its monetary policy extremely loose against the backdrop of slow surge and inflation.
By the way, the widening interest rate differential between Japanese and American bonds has made the evergreen buck a more attractive bet than the Japanese currency.
The UK pound dived by 0.25% hitting $1.2941.
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Main news that will drive the market in the upcoming week include CB Consumer Confidence Index, Canadian GDP, and US Core PCE Price Index
The Federal Reserve (Fed) will announce its Interest Rate Decision and make a statement about the future monetary policy on Wednesday, September 21, GMT+3. After the higher-than-expected inflation numbers published on September 13, there’s almost no doubt the Federal Reserve will come up with another 75-basis-point rate hike. However, surprised by the CPI numbers, several Fed members announced the possibility of a 100-basis-point rate hike on Wednesday.