Forex News Trading Events For The Week of October 27th – 31st.

I’ve put together some analysis of this week’s Forex news events, which I hope will give everyone a good understanding of how I’m viewing the market for this week.

This week’s “high impact” news events that I will be looking to trade are as follows;

Sunday 26th October 2014

EUR – ECB Bank Stress Test – 07:00GMT

There have rumours circulating throughout the week that there is the possibility that 25 banks within Eurozone will fail the stress test, this could potentially be a trigger for a crisis in the EU area. What the ECB are trying to accomplish with this stress test is to ensure that the banking institutions within Europe have made concessions for a financial crisis similar to that of 2008 and are subsequently prepared for numerous scenarios with enough capital reserve available to oversee any similar crises. As stated there have been rumours in circulation that at least 25 banks may potentially fail those stress tests, if that does happen we could expect to see the market become more apprehensive to hold the EUR also this could spur the ECB to take further action regarding that particular state of affairs. The market’s reaction at this stage isn’t indubitable therefore at this stage with this particular event it’s very important that we assess the results and successive market reaction. If we don’t observe notable movement on the EUR at the start of the week I wouldn’t expect any prolonged volatility on the currency spurred by the event, however if we do this will give us a clear indication on how to trade the EUR over the coming week. Having said that my expectations prior to the result are that the results will come out we’ll witness some short term volatility on the currency that will moving forward for the most part be disregarded by the market and the EUR, but I’m not positioning myself in the market before the results or reaction as I’m not completely satisfied that the market will respond to these particular events as anticipated. Hence the best course of action with these stress tests is to observe the results, observe the market’s reaction and trade with caution.

Tuesday 28th October 2014

NZD – ANZ Business Confidence – 20:00GMT

There is no forecast level for this event; the previous level was 13.4%, bearing in mind we are dovish on the NZD at present particularly against the stronger currencies. This is due to the fact that the RBNZ are desperately trying to devaluate their currency, they would like to see NZDUSD trading at 65¢ as oppose to its current level of 78¢. Hence the RBNZ want to see the NZDUSD shift downwards another 100o pips and more so that they feel comfortable with the valuation of their currency. The RBNZ had been in a rate hike cycle and they are approaching the second half of that term, but a great deal of banks and analysts have significantly delayed their expectations for a rate hike into the latter half of 2015 due to a flurry of weak data stemming from the Kiwi economy; inflation readings fell short of expectations coupled with a negative trade balance. This has eased the pressure on the RBNZ to raise rates again, granting them opportunity to take their time, take a step back and just see how the economy plays out before making a decision on if and when to implement those second round of rate hikes. In summary I typically wouldn’t expect this event to hold notable consequence over market movement or price action, however if we consider the situation the RBNZ are in and what that central bank is going to be focussing on, it’s just worth keeping note of this event to grant us some insight into what the RBNZ’s next play might be.

Wednesday 29th October 2014

GBP – MPC Member Haldane Speaks – 13:30GMT

The last time we had commentary from the BoE’s policy maker Andrew Haldane we witnessed some movement in the on the currency, he is typically a hawk. But generally we are dovish on the GBP at present particularly against the stronger currencies there is still scope to buy the GBP against those weaker currencies based on the interest rate differentials but it is imperative that you know which banks are going to hike coupled with when they will be looking to do so and the expectations surrounding each bank so you know which currencies to be buying and which currencies to selling against the GBP.

USD – FOMC Statement & Federal Funds Rate – 14:00GMT

These are the events of the week that hold primary importance; the federal funds rate is forecast to remain unchanged however there has been allot of speculation with some tentative reports stemming from within the Fed that this will be the week that the US economy bring an end to adding stimulus to their economy by halting their QE programme. There has been a great deal of conjecture about the Fed potentially not ending QE and simply pausing their taper and leaving a little bit on just in case, so that they can gauge how the economy recovers. What I am expecting is for the Fed to taper, I am expecting them to upgrade their economic forecasts thereby displaying some positivity acknowledging the reduced unemployment rate whilst displaying concern that the quality of the labour market isn’t quite what they would like to see. In addition to this I would expect to see the Fed displaying concern over the recent sluggishness of the worldwide economic growth and perhaps most importantly display concern of domestic inflation levels, having said that I don’t think there are any massive concerns over inflation it is gradually growing but we know it’s not rising as hastily as the Fed would hope for, which is of course another focal point for the Fed. So generally the current situation for the US economy is relatively balanced, relatively moderate and therefore predominantly positive but over the previous few weeks and months the market got worked-up regarding the purchasing of USD in anticipation of this “amazing recovery” in the US and the Fed being far more hawkish than the market had become accustomed to. The market is in spite of that re-evaluating those expectations as events haven’t quite panned out as the market was hoping, although in reality nothing has really changed, the Feds rhetoric maintains that any plays they make will be data dependent, that data hasn’t been to bad admittedly it hasn’t been fantastic either but it is demonstrative of a nice steady recovery. Consequently I expect the Fed to end their taper and complete their QE programme, but I would expect that they pay heed to those concerns to give themselves more time if anything as if to say” we’ve paused/stopped the QE programme but now we want to observe globally and domestically how economically things pan out before any specific plans regarding a rate hike” essentially they want to keep rates as low for as long as they can and I would expect them to remind the markets that they could re-introduce QE if the need arises. The market is for the most part expecting all of this and therefore I would expect USD strength to remain, the market will realise that the Fed aren’t as close to rate hikes as initially expected but they will certainly be one of first banks amongst its main counterparts to raise rates.

NZD – New Zealand Cash Rate & RBNZ Rate Statement – 16:00GMT

We know that there is going to be no change of rates therefore it’s the statement from their central bank that should be our primary focal point, we can expect the RBNZ to be as dovish as possible in an effort to keep a lid on the NZD. We can expect the RBNZ to intervene again similarly to how they did in August when they sold $500,000,000 worth of their currency to devalue the currency, however any further intervention by the RBNZ should only be expected at the most opportune times or when it will be most effective. Of course this is an artificial move the ZND still pays an attractive swap when you hold it so, that’s not going to deter the carry traders. Therefore the RBNZ are going to be facing a constant battle to drive the worth of their currency lower; short term I think they’ll manage to devalue the currency but long term particularly as we draw closer to another play in that rate hike cycle, I would expect that the NZD becomes flavour of the month again and expect the currency to rally at some point, this is as stated a longer term view and I wouldn’t expect any moves in the near future.

CAD – BoC Gov Poloz Speaks – 16:15GMT

This is a delayed event Gov Poloz was due to speak last week but it was put back due to the shootings, this is the first statement the BoC are to make following the announcement that they are to remove forward guidance. Therefore the BoC are no longer going to give a clues as to their plans in their commentary all subsequent decisions are going to be data dependent and they will provide little to no indication as to their thoughts on their intentions moving forward. Therefore if they have plans to cut or hike rates there will be forewarning beforehand as to what they might do, this puts the onus on the markets to pay close attention to the data to ascertain what the BoC will do.

Thursday 30th October 2014

EUR – German Prelim CPI – All Day

This figure is forecast to come in negative, this is notable because Germany are considered the life vest of Europe, if Germany start to sink Europe has no chance. This means the ECB will have to take stronger measures to stimulate the lagging European economy, they are already running an ABS Programme with the ever growing in feasibility a QE programme. By the time of this CPI reading we will of found out how many bonds the ECB has purchased as part of their ABS programme granting us insight into how aggressive they are being as part of their policy to add momentum to the economy, this could give us an indication to their strategy moving forward. However if inflation keeps getting lower, expect the ECB to do something, which means fully fledged QE which means a weaker Euro.

USD – Advanced GDP – 08:30GMT

Figures are expected to have fallen markedly from previous levels of 4.6% to 3.1&, however this is still a positive figure for an economy like the US. If we do however get a release that exceeds forecasts expect to see further support in the argument for buying the currency, if we do get a release that falls lower than the estimated 3.1% I wouldn’t expect to see any USD sell off’s given all the positive factors surrounding the currency.

USD – Fed Chair Yellen Speaks – 09:00GMT

Any comments that she make’s particularly those pertaining to how the Fed views the growth of their domestic economy will be taken as clues as to when they will raise rates, that is the question on everyone’s lips. When are the Fed going to hike rates in comparison to their peers, this is the basic road on which currencies you should be buying and which currencies you should be selling against one another.

JPY – Japanese Monetary Policy Statement – Tentative

This reading is important as inflation is lagging couple this with the fact that Japans national debt is growing exponentially, therefore we want to see what the BoJ are going to say. If inflation continues to get weaker and fall short of their 2% target we could see a call for more action from the BoJ. Due to the sustained short fall of their targets we can expect in one of the upcoming monetary policy statements not necessarily this one but definitely at some point over the next 4-6 months an announcement from the BoJ of Japan that they are adding additional stimulus measures, unless of course we see a shift in momentum for the economy, we haven’t had that improvement thus far so the market bias is that we can expect to see further action from the BoJ imminently.

Friday 31st October 2014

EUR – Euro CPI Flash Estimate – 06:00GMT

This is pivotal due to the aforementioned commentary regarding the Euro; figures have slipped consecutively for some time now having said that forecasts are that figures will marginally exceed those of previous levels. The ECB have recently added stimulus measures and cut rates hence the revision from analysts and noted rise in expectations albeit marginal, if however we get a reading that falls short of expectations this is a very bad sign for the Euro, What that means is the slashing of rates and introduction of stimulus is still not enough to spur the economy and will give us an early indication into the fact that the ECB may very well have to add additional stimulus. If however figures come out positive, that could remove the need for the ECB to act and we could actually see the EUR rally, so this coupled with the German CPI earlier in the week are pivotal readings that we as traders want to be paying close attention to.

CAD – Canadian GDP – 08:30GMT

There is no forecast for any shift in momentum for Canadian GDP with figures expected to remain at a flat rate of 0.0%, if we look at the data coming from Canada; inflation is low, GDP is low, growth is low consumer debt is high and the housing bubble is growing. Therefore there is pressure on the BoC, I believe their next play will be a hike, but I can’t see that happening for at least another year and this GDP figure (if released as expected) in the meantime just adds to further negativity for the CAD and gives us no reason to do anything else but sell the currency.

AUD – Chinese Manufacturing PMI – 21:00GMT

This Chinese data could have a bearing on the AUD, but the AUD particularly against the USD is a sell on the rallies at the moment as the RBA are desperately trying to talk it down. Couple this with the fact that there is no particular stand out piece of data coming from the Aussie economy to prompt positivity or trigger the market to start buying the currency back.

Source: Forex News Trading Events For The Week of October 27th – 31st.

About the Author
Jarratt Davis is the world’s ranked #2 (2008-2013) Forex Trader by Barclays FX Hedge Index, following years of mastering his art as a self employed trader Jarratt has now entered the field of education and delivers the most robust Forex education package on the market. Jarratt’s mentorship is one of the only programs on the market that is conducted by a verified professional trader. Forex Alchemy readers can get the FREE mini course where Jarratt gives away some of his secrets to success by Clicking Here... [space height="20"] [social type="facebook"][/social] [social type="twitter"][/social] [social type="google-plus"][/social] [social type="youtube"][/social]

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