This week is packed with key economic events that could cause significant movements in various currency pairs. Traders should brace themselves for a potentially volatile week in the markets.

Summary Table: Key Events to Watch

Tuesday, January 22, 2024: Bank of Japan Monetary Policy Statement and US Richmond Manufacturing Index

The Bank of Japan is set to release its Monetary Policy Statement that outlines the outcome of the bank’s decision on asset purchases and provides commentary about the economic conditions influencing their decisions. This announcement, alongside the BOJ Policy Rate and BOJ Outlook Report, is expected to impact the USD/JPY currency pair. Traders will be keenly watching for any changes in the policy rate or outlook report that could signal a shift in Japan’s monetary policy.

Meanwhile, the United States will release its Richmond Manufacturing Index. This indicator measures the health of the manufacturing sector in the Richmond District. As the manufacturing sector makes up a significant part of the total US GDP, a high reading suggests bullishness for the USD, while a low reading implies bearishness.

Wednesday, January 24, 2024: New Zealand’s CPI and Eurozone’s Flash PMIs

New Zealand is set to announce its quarterly Consumer Price Index (CPI), which measures the change in the price of goods and services from the perspective of the consumer. This key metric of inflation is expected to influence the USD/NZD currency pair.

In Europe, traders will be eyeing a slew of flash Purchasing Managers’ Indexes (PMIs) from France, Germany, the broader Eurozone, and Britain. These indicators measure the economic health of the manufacturing sector. A reading above 50 signals expansion, while a reading below 50 indicates contraction. These PMIs could sway the EUR/USD and GBP/USD pairs based on whether the readings meet, exceed, or fall short of expectations.

Also on Wednesday, the Bank of Canada will release its Monetary Policy Report, Rate Statement, and Overnight Rate. These insights into the bank’s view of economic conditions and inflation will likely impact the USD/CAD currency pair.

Thursday, January 25, 2024: German Ifo Business Climate and ECB Main Refinancing Rate

Germany will release its Ifo Business Climate Index, a leading economic indicator in Europe that measures current business conditions and expectations for the next six months. A high reading is seen as positive (or bullish) for the Euro, while a low reading is seen as negative (or bearish).

The European Central Bank (ECB) will announce its Main Refinancing Rate and provide a Monetary Policy Statement. These announcements often lead to market volatility and could influence the value of the Euro and the EUR/USD currency pair.

On the same day, the US will release several key economic indicators including Advanced GDP q/q, Unemployment Claims, Advance GDP Price Index q/q, Core Durable Goods Orders m/m, Durable Goods Orders m/m, and New Home Sales. These releases are likely to have an impact on the dollar exchange rate and associated currency pairs.

Friday, January 26, 2024: Japan’s Tokyo Core CPI and USA’s Core PCE Price Index

Japan will release its Tokyo Core Consumer Price Index (CPI) y/y, which measures the change in the price of goods and services purchased by consumers in Tokyo. This data could impact the Yen and the USD/JPY pair, as it’s a leading indicator of nationwide inflation trends.

Finally, the US will release its Core Personal Consumption Expenditures (PCE) Price Index m/m. The Fed uses this as their primary gauge of inflation, and changes in this index can impact the dollar and associated currency pairs.

In conclusion, this week is packed with key economic events that could cause significant movements in various currency pairs. Traders should brace themselves for a potentially volatile week in the markets.

EUR/USD: A Rollercoaster Ride Below 1.0900

EUR/USD appears to be stuck in a rut, trading marginally below the 1.0900 mark during the American session. The lack of key data releases combined with a buoyant market atmosphere has hampered the US Dollar’s ability to gain momentum, allowing the pair to mitigate losses.

The EUR/USD pair remains relatively stagnant just under the 1.0900 threshold as Monday unfolds. With no significant macroeconomic announcements or high-priority events on the week’s agenda, traders are erring on the side of caution. On the other hand, the positive performance of global stocks curtails the demand for the US Dollar. Wall Street’s robustness fuels moderate optimism, especially with earnings outpacing expectations.

GBP: Riding High Despite Recession Fears

The Pound Sterling (GBP) is enjoying a weekly high as risk appetite improves. The broader appeal of the GBP/USD pair remains positive even as the UK economy teeters on the brink of a technical recession. This precarious situation has arisen due to weak household spending and severe pessimism among business owners about the economic future.

The Bank of England (BoE) is anticipated to face difficulty in making a decision owing to persistent price pressures and fears of recession. This makes it challenging for policymakers to maintain a restrictive interest rate stance. Despite this, the market mood stays upbeat as investors shift their focus to the Federal Reserve (Fed)’s May monetary policy meeting for the first rate cut, previously expected in March. Fed policymakers continue to promote higher interest rates over an extended period to ensure inflation returns to the 2% target swiftly.

BTC: A Defensive Stance Above $41,000

Bitcoin (BTC) is trading cautiously above $41,000 on Monday following a week-long decline. Actions by whales on a major crypto exchange, such as closing their leveraged positions, have led to a substantial increase in the USDT reserve. These strategic moves, which resulted in a 21% decrease in open interest on Bitfinex, indicate that BTC could experience further losses.

Bitcoin is struggling to stay afloat in choppy waters, trading at $41,000 after its value dropped last week. A reduction in open interest by large investors (known as whales) and an increase of their Tether (USDT) reserves on Bitfinex suggest that the downward trend for BTC price could continue in the near term.

GBP/USD: Holding Steady Above 1.2700

The GBP/USD pair is showing slight fluctuations in a narrow band just above 1.2700 on Monday. The rebound of the major pair is strengthened by the risk-on environment. However, escalating tension in the Red Sea could spur demand for safe-haven assets and limit the pair’s upside.

After a bearish pressure spurred by the USD rally last week, GBP/USD managed to stage a comeback in the latter half, erasing most of its weekly losses. The pair’s short-term technical outlook is yet to suggest a build-up of bullish momentum as it maintains stability around the 1.2700 mark on Monday morning in Europe.

But investors remain uncertain about the timing of the Federal Reserve (Fed) policy shift ahead of this week’s crucial US growth and inflation data. According to the CME FedWatch Tool, the likelihood of a 25 basis point rate cut in March has dropped from 70% to approximately 50%.

With no high-tier data releases scheduled for Monday, the economic calendar remains sparse.

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