A volatile trading session is expected today in the European Session for the forex market, with a focus on economic data related to the economy of UK. The most important economic event for the day is probably the Bank of England Interest Rate Decision, and the Inflation Report which can set the expectations of future monetary policy shift and influence significantly the British Pound.
In the American Session the US Consumer Price Index will be monitored as its figure can at a large degree highlight whether in June the Fed will increase again or not the key interest rate to fight the rising inflation rate. Moderate to high volatility is expected today for the British Pound and the US Dollar against other currencies.
Key economic events for today which can move the forex market:
- Italy: Industrial Production, UK: Construction Output, Manufacturing Production, Balance of Trade, Industrial Production, BoE Inflation Report, BoE Interest Rate Decision, BoE Quantitative Easing, BoE Governor Carney Speech, Russia: Foreign Exchange Reserves
Time: 08:00 GMT, 08:30 GMT, 11:00 GMT, 11:30 GMT, 13:00 GMT
A lot of important economic data for the economy of UK, with the anticipated Bank of England Interest Rate Decision having the potential to move the British Pound combined with the Inflation Report. The following excerpt shows the importance of this Interest Rate Decision for the trend of the British Pound and reaction of the forex market participants upon its release.
“The Bank of England voted by seven to two to keep the Bank Rate at 0.5 percent on March 22nd, saying pay growth is likely to pick up in response to the tightening labour market and inflation is expected to remain above the 2 percent target in the short term. Also, the bank reiterated that an ongoing tightening of monetary policy over the forecast period will be appropriate to return inflation sustainably to its target, raising expectations of a May rate hike.” Source: Trading Economics.
The 5-year chart for the Key Interest Rate in UK shows a Low-High range of 0.25%-0.50%.
The Bank of England is monitoring the labour market and the inflation rate with a 2 percent target rate. Although the expectation is for an unchanged key interest rate at 0.5%, any positive economic surprise or statements about the inflation report which may indicate a change in the monetary policy may influence significantly the British Pound, which has been depreciated significantly lately against the US Dollar.
The forecast for the yearly Manufacturing Production and Industrial Production in UK are for
an increase, which should also be positive for the British Pound, while the Construction Output is expected to decline further and being negative, a negative fundamental factor for the British Pound, reflecting weakness in the Construction Sector. Also, the forex market will monitor the Balance of Trade in UK, with a narrower trade deficit considered positive, plus the Inflation Report and the Bank of England Quantitative Easing Program.
Statements about increased inflation are considered positive for the future and any hints that may point to a gradual tapering of the Quantitative Easing Program will also probably be supportive for the British Pound. Overall the actual release of the bank of England Interest Rate Decision may not be the catalyst for any significant move for the British Pound, but rather the expectations on current economic conditions, mainly the inflation rate and the growth rate.
For Italy, an increase in the monthly Industrial Production is expected with a figure of 0.4%,
higher than the previous figure of -0.5%, which should provide some support for the Euro as well. The Foreign Exchange Reserves in Russia can provide insights about the financial stability of the Russian Ruble and if there is any intervention from the Central Bank of Russia to support its price.
- Canada: New Housing Price Index, US: Core Inflation Rate, Inflation Rate,
Continuing Jobless Claims and Initial Jobless Claims
Time: 12:30 GMT
The forex market will focus on the release of the Inflation Rate in US, and mainly on the Core Inflation Rate, which is a more conservative measurement of the real inflationary pressures in the economy, as it excludes the volatile price changes of food and energy. The forecast is for an unchanged yearly figure of 2.1%, but any economic surprise with a value higher than that, may in fact light the green light for an interest rate increase by the Fed in June 2018. As seen from the chart the Core Inflation Rate in US has increased significantly during the previous month, over the target rate of 2.0%, which is monitored by the Fed.
The yearly non-core Inflation Rate is expected to increase at 2.5%, higher than the previous figure of 2.4%, and monthly to increase at 0.2%, also higher than the previous figure of -0.1%. Lower than expected or declining readings for the weekly US Continuing and Initial Jobless Claims will be supportive for the US Dollar reflecting a strong labor market. The forecasts are for an increase for both figures, which may influence negatively the US Dollar, although the key driver for the US Dollar will be the release of the Core Inflation Rate.
The Canadian Dollar may move with the release of the New Housing Price Index (NHPI), which tracks the selling prices of new residential houses. A higher than expected figure is considered positive for the Canadian Dollar, reflecting a strong housing market, a key leading indicator of the broader economy.
- New Zealand: Business PMI, Reserve Bank of New Zealand Governor Orr Speech, Australia: Consumer Inflation Expectation
Time: 01:00 GMT, 01:10 GMT, 22:30 GMT
The Business NZ PM measures the business conditions in New Zealand with figures above the 50.0 level indicating increased economic and business activity, being positive for the New Zealand Dollar. The Consumer Inflation Expectation in Australia presents the consumer expectations of future inflation during the next 12 months, and high figures are highly correlated with an increased probability of a rate hike by the Reserve Bank of Australia in the future, being positive for the Australian Dollar.
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