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.
Key Event for All Forex: Fed Statement
What will happen?
The US central bank, Federal Reserve, will announce its decision on further monetary policy on December 15 at 21:00 MT. Most traders are waiting for it eagerly as this announcement will define the price dynamics of the most traded currency in the Forex market – the US dollar.
What to expect?
There are two key things that traders should watch for: the pace of taper and outlook for the rate increase. The recent comments of Fed Chair Jerome Powell have signaled that the Fed is hawkish. Fed officials have already mentioned that the central bank can decide to double the pace of its taper to $30 billion a month. Speaking about rates, analysts expect that the first rate hike will not appear until summer. However, the Fed may hint at raising rates earlier than the markets expect.
How to trade on the Fed Statement?
It’s important to follow the overall market sentiment. The USD may rise ahead of the Fed statement as traders expect hawkish moves from the Fed.
- If the Fed tapers more or decides to hike rates sooner than expected, the USD will rocket.
- If the Fed leaves the policy unchanged, the USD will fall.
Check the economic calendar
Instruments to trade: all majors, gold, US stock indices
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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