This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
Increased Volatility is Coming
RBA Rate Statement
February 7, 05:30 GMT+2.
The Reserve Bank of Australia (RBA) will make a statement and release a Cash Rate on February 7, 05:30 GMT+2. It's among the primary tools the RBA uses to communicate with investors about monetary policy. It contains the outcome of its decision on interest rates and commentary about the economic conditions that influenced the decision. Most importantly, it discusses the economic outlook and offers clues on the outcome of future decisions.
Experts expect that the RBA will raise the cash rate by 25 basis points to 3.35%, before pausing the tightening cycle. However, in their opinion, a larger hike of 40 basis points coupled with a stated intention to pause could also be on the table.
Last time, the RBA increased the cash rate by 25 basis points, causing an increased volatility in AUDCHF.
- If the RBA overperforms expectations, the AUD may rise.
- Otherwise, the AUD will plunge.
Instruments to trade: AUDUSD, AUDCHF, EURAUD.
Fed Chair Powell Speaks
February 7, 19:00 GMT+2.
Jerome Powell, the chairman of the US Federal Reserve, will make a speech at the Economic Club of Washington on February 7, at 19:00 GMT+2.
On the previous week, Federal Reserve officials made their eighth interest rate increase in a year and signaled two more to come as they continue their fight against rapid price gains. However, they approved a smaller increase than in the past and acknowledged that inflation had finally started to meaningfully ease.
As head of the central bank, which controls interest rates, he has more influence over the nation's currency value than any other person. Traders scrutinize his public engagements as they are often used to drop clues regarding future monetary policy.
- More hawkish comments than expected will help the USD to rise.
- Otherwise, USD may fall.
Instruments to trade: EURUSD, GBPUSD, XAUUSD.
February 10, 09:00 GMT+2.
The Office for National Statistics will release the UK Gross Domestic Product (GDP) m/m change on February 10, 09:00 GMT+2. GDP the broadest measure of economic activity and the primary gauge of the economy's health.
Analysts expect Britain to be the only major industrialized country whose economy will shrink this year after the impact of Liz Truss's brief premiership. Moreover, the International Monetary Fund made a sharp growth downgrade of the UK economy perspectives in 2023 as well.
Last time, the actual result overperfomed the expectations, causing 400-points spike in GBPUSD.
- If GDP data is higher than expected, GBP will rise.
- Otherwise, GBP may fall.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.
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The RBA and the Bank of Canada will add volatility to the AUD and the CAD, while USD is expected to be boosted by the Non-farm payrolls.