After a very rich economic calendar yesterday with 3 monetary decisions, today the trading week ends with fewer economic events, and volatility is expected to be moderate. Moderate to high price action and volatility is expected for the EUR/USD and the GBP/USD currency pairs as there are news about the economies of Eurozone, UK and the US.
These are the main economic events for today in the forex market to focus on:
European Session
- ECB Draghi Speech, Eurozone Balance of Trade, Central Bank of Russia Interest Rate Decision
Time: 09:00 GMT, 10:00 GMT, 10:30 GMT
The surplus in the balance of trade for the Eurozone is expected to narrow to 24.6 Billion Euros, lower than the previous figure of 26.4 Billion Euros. The balance of trade is the difference of the value of a country’s exports of goods and services from the value of its imports. If exports are greater than imports, then the country faces trade surplus or if imports are greater than exports, then the country faces trade deficit.
In general a trade surplus is considered positive for the local currency, reflecting higher demand for the currency which can lead to its appreciation against other currencies. The Central Bank of Russia is expected to cut the key interest rate by 25 basis points, from 8.25% to 8.00%, a decision which can move the Russian Ruble, with the odds leaning towards having a selling pressure or a depreciation against other currencies.
American Session
- US NY Empire State Manufacturing Index, US Industrial Production, Net Long-Term Tic Flows, Foreign Bond Investment, Overall Net Capital Flows
Time: 13:30 GMT, 14:15 GMT, 21:00 GMT
NY Empire State Manufacturing Index measures the general business conditions in the manufacturing sector at the New York State. Higher readings or rising ones indicate improved business conditions and are positive for the US Dollar. The forecast is for a lower reading of 18.60, compared to the previous reading of 19.40. Also higher than expected or rising figures for the industrial production are considered positive and supportive for the US economy and the US Dollar, signaling increased growth for the industrial sector, but also inflationary pressures, as higher industrial production can lead to higher consumer and business spending, increasing the costs of goods and services.
Higher than expected readings are positive for the US Dollar, indicating higher demand for the US Dollar from foreign holders of US securities. In theory a weaker dollar should attract more International Capital inflows are the US securities are now cheaper for the foreign holders or investors. The higher US interest rates should also be supportive for the US Dollar and the Capital Inflows in the United States. Overall the figures of the net capital flows must be monitored closely as their trends can indicate important insights on the supply/demand for assets nominated in US Dollar which can influence the US Dollar both short-term and in the long-term.
