As we start the new trading week on Monday, 20th November 2023, it’s crucial to understand that global events significantly impact the forex market. From geopolitical incidents to economic policy shifts, these events can quickly and dramatically influence currency values.
Here’s an analysis of this week’s events and their potential implications for trading and forex exchanges.
Monday: BOE Governor Bailey’s Speech
Bank of England (BOE) Governor Bailey is expected to speak today. His comments will be closely watched for any hints about future monetary policy adjustments. Any unexpected announcements could trigger volatility in GBP-related currency pairs.
Tuesday: RBA Meeting Minutes, Canadian CPI Report, and More
Tuesday will witness a flurry of activity, starting with the Reserve Bank of Australia (RBA) Governor Bullock’s speech and the release of the RBA Monetary Policy Meeting Minutes. Traders will scrutinize these for insights into the central bank’s view on the economy and indicators of future interest rate decisions.
In Canada, the Consumer Price Index (CPI) report will provide an update on inflation, a key factor influencing Bank of Canada’s (BOC) monetary policy
Most importantly, traders will anticipate European Central Bank (ECB) President Legarde’s speech and the publication of the Federal Open Market Committee (FOMC) Meeting Minutes for potential clues on future monetary policy direction in the Eurozone and the US, respectively.
Wednesday: Unemployment Claims, Consumer Sentiment, and More
Wednesday will see RBA Governor Bullock speak again, along with the release of the ECB Financial Stability Review. The US will also release data on Unemployment Claims and Core Durable Goods Orders m/m, which could impact USD pairs.
The Revised University of Michigan (UoM) Consumer Sentiment could also cause some USD volatility, while a speech by the BOC Governor will be monitored by traders interested in CAD pairs.
Thursday: Eurozone Flash PMIs
On Thursday, the focus will shift to the Eurozone with the release of Flash Manufacturing and Services PMIs. These indicators provide early insights into the health of the Eurozone economy and can influence ECB’s monetary policy decisions.
Friday: German Business Climate and More
Friday brings more data releases, starting with the German Ifo Business Climate index, which measures the level of business optimism in the Eurozone’s largest economy. ECB President Legarde is also scheduled to speak again.
In Canada, traders will watch for the Core Retail Sales m/m and Retail Sales m/m figures, which could sway the CAD’s value. The US will close the week with the release of its Flash Manufacturing PMI and Flash Services PMI, potentially causing further USD fluctuations.
In summary, this week is packed with significant events that could sway the forex markets. Traders must stay updated on these events and adjust their strategies accordingly for successful forex trading.
|Monday||BOE Governor Bailey’s Speech||Volatility in GBP-related currency pairs|
|Tuesday||RBA Governor Bullock’s Speech and RBA Monetary Policy Meeting Minutes||Insights into RBA’s view on the economy and future interest rate decisions|
|Tuesday||Canadian CPI Report||Update on inflation, influencing BOC’s monetary policy|
|Tuesday||ECB President Legarde’s Speech and FOMC Meeting Minutes||Clues on future monetary policy direction in the Eurozone and the US|
|Wednesday||RBA Governor Bullock’s Speech and ECB Financial Stability Review||Influence on AUD and EUR pairs|
|Wednesday||US Unemployment Claims and Core Durable Goods Orders m/m||Potential impact on USD pairs|
|Wednesday||Revised UoM Consumer Sentiment and BOC Governor Speech||Potential volatility in USD and CAD pairs|
|Thursday||Eurozone Flash Manufacturing and Services PMIs||Early insights into the health of the Eurozone economy|
|Friday||German Ifo Business Climate index and ECB President Legarde’s Speech||Measures business optimism in Germany and potential influence on Eurozone’s monetary policy|
|Friday||Canadian Core Retail Sales m/m and Retail Sales m/m||Potential impact on CAD’s value|
|Friday||US Flash Manufacturing PMI and Flash Services PMI||Potential fluctuations in USD|
EUR/USD Maintains Highs
The EUR/USD currency pair is currently maintaining its gains above the 1.0900 mark, due to ongoing weakness in the US Dollar. This consolidation near three-month highs has been observed during the European morning trade.
The pair is making the most of the sustained weakness in the US Dollar, which is largely attributed to increasing speculation of Federal Reserve rate cuts in the coming year. An optimistic market mood also contributes to the major’s performance at the beginning of the week.
Last week saw the EUR/USD pair gaining over 2%, closing above 1.0900. The upward trend continued into early Monday, reaching its highest level since late August, at above 1.0930.
USD Struggles Amid Weak Macroeconomic Data
The continuing selling pressure on the US Dollar, reinforced by underwhelming inflation figures for October, was a significant driver behind the EUR/USD’s notable rally last week. As the new week commences, the US Dollar is finding it difficult to rebound due to a lack of substantial macroeconomic data releases.
In response to negative activity during Asian trading hours, US stock index futures have turned positive for the day in the European morning, with the Euro Stoxx 50 opening flat. If risk flows begin to influence financial market activity later in the day, the US Dollar may remain weak, potentially aiding the EUR/USD in pushing higher.
GBP/USD Regains Mark
Meanwhile, GBP/USD has regained the 1.2500 mark, thanks to the ongoing sell-off of the US Dollar. The pair’s upside is being supported by a softer US Dollar and lower US Treasury bond yields. Despite mixed market sentiment, the US Dollar is under pressure due to a significant USD/JPY sell-off.
After ending Thursday just above 1.2400, the GBP/USD edged slightly higher in Friday’s European session. It is likely to encounter strong resistance at 1.2450, with technical buyers expected to step in once this level turns into support.
US Treasury Bond Yields and FTSE 100 Index
The US Dollar is struggling to find demand due to lackluster macroeconomic data releases from the US. Notably, the number of first-time unemployment benefit claimants for the week ending November 11 rose to its highest level since August, at 231,000. Moreover, Industrial Production contracted more rapidly than expected in October.
US Treasury bond yields continue to decline following a significant drop earlier in the week due to poor inflation readings. The benchmark 10-year US Treasury yield recently fell by more than 1%, dropping slightly below 4.4%.
On the other hand, the UK’s FTSE 100 Index has risen by nearly 1%, and US stock index futures are trading modestly higher on the day, indicating an improved risk mood. If risk flows dominate the financial markets later in the day, the GBP/USD could build on this week’s gains. However, investors are unlikely to react to the Housing Starts and Building Permits data for October, which will be featured in the US economic docket.
Gold Price Overview: Key Fundamentals
As of today, the gold price continues its corrective decline from a ten-day peak of $1,993 set on the previous Friday. It’s currently seeking a definitive direction at the start of this new week on Monday. With the absence of significant U.S. economic data and commentary from the Federal Reserve, risk sentiment is expected to be the primary driver of gold price action.
Impact of Risk Trends and US Treasury Bond Yields on Gold Price
Risk sentiment has improved early this Monday, bolstered by optimism surrounding China’s stimulus measures and favorable corporate earnings reports from Japan. Despite the People’s Bank of China (PBOC) keeping the Loan Prime Rate (LPR) at 3.45% in November, a resurgence in China’s property stocks has boosted the overall market mood. This uplift comes after Chinese regulators committed to provide more policy support to the beleaguered real estate sector.
The upbeat market mood, together with heightened expectations for U.S. Federal Reserve (Fed) interest rate cuts next year, has intensified the weakness of the U.S. Dollar across the board, offering some support to gold buyers. However, a renewed uptick in U.S. Treasury bond yields, triggered by improved sentiment, is acting as a headwind for the gold price, constraining its upside potential.
Forward-Looking Perspectives on Gold Price
Moving forward, the dynamics of the U.S. Dollar and U.S. Treasury bond yields are likely to influence the gold price, given the absence of any high-impact economic releases or scheduled speeches from Fed policymakers in the U.S. economic docket. Also, the U.S. Dollar price action could be swayed by sentiment around the USD/JPY pair, as further correction in the latter could deepen the pain for the Greenback, helping the gold price remain resilient.
On the previous Friday, the gold price hit a fresh ten-day high but swiftly pulled back to end the day nearly flat, despite a sell-off in the U.S. Dollar. This occurred as the benchmark 10-year U.S. Treasury bond yields staged a robust rebound from two-month lows. A series of speeches from Fed officials suggested that the Fed should maintain a patient stance on interest rates, thereby keeping the bearish pressure on the U.S. Dollar.
However, end-of-the-week flows and profit-taking in the wake of the recent surge triggered a sharp pullback in the gold price last Friday.
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