The new weekly trading session in the forex market starts with a very light economic calendar and the absence of important fundamental data and news for the majority of sessions, such as the American, Asian and Pacific. However, on Friday 12th January 2018, there were extreme trending moves for the Euro and British Pound against the US Dollar, without any fundamental news related to the Eurozone or the economy of the UK.
This is very odd, but was the result of the ECB statements that there could be a sooner than expected change in the easing cycle and quantitative easing program perhaps in 2018. The Euro reached a 3-year high against the US Dollar the past week reaching the 1.22 level, while the British Pound also made a new year high against the US Dollar as well, closing above the 1.37 level. This week it will be interesting to monitor if these strong trends will continue, pause or even maybe make a reversal.
Risk trends, economic outlook and fundamental data will provide these answers soon. On Wednesday 17th January 2018 there is a monetary policy decision by the central bank of Canada and the forecast is for a 25 basis points interest rate increase in the benchmark interest rate, from 1.00% to 1.25%. This economic event combined with the recent rally in oil prices can form or sustain a new trend for the USD/CAD.
These are the main economic events to focus on today in the forex market:
European Session
- Eurozone Balance of Trade, Russia foreign Exchange Reserves, BoE Tenreyro Speech
Time: 10:00 GMT, 13:00 GMT, 18:15 GMT
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. The forecast is for an increase in the balance of trade surplus for the Eurozone with a figure of 28.2 Billion Euros, higher than the previous figure of 18.9 Billion Euros. This large increase in the balance of trade surplus is positive for the Euro, leading to its appreciation against other currencies as it indicates large capital inflows in the Eurozone for goods and services denominated in Euros.
Increased demand leads to higher appreciation for the Euro. But a large appreciation for the Euro may be harmful for exports as it now makes the exports more expensive to other countries with different local currencies. The main question is if this trend is sustainable over time and in 2018 for the Euro, which performed very well in 2017, especially against the US Dollar. The level of foreign exchange reserves in Russia and a speech from a central bank official from the Bank of England may add some volatility for the Russian Ruble and the British Pound. But the forex market participants will most probably focus on the EUR/USD price action for today, which may exhibit moderate to high volatility and price action.
