Forex News – Fed decision looms large in action-packed week
January 27, 2014 11:19 am
Following a week that emerging markets started to face serious market pressure, a number of events is likely to have a major influence on foreign exchange trading this week.
First of all, the Federal Reserve will announce on Wednesday the result of its two days of deliberations. This will be interesting for a number of reasons. For people that are sensitive to leadership changes in monetary policy, this will be the last meeting during which Ben Bernanke will be the chair. Expect the media to be filled with evaluations of the Bernanke Fed’s actions in trying to stem the worst financial crisis of the last 80 years.
The market also expects the Federal Reserve to almost certainly reduce its monthly bond-buying stimulus by 10 billion dollars to 65 billion. What could be more interesting however- since more tapering is seen as almost a done deal – is what the Fed and its new leadership will start to say about forward guidance. The fact that unemployment is at 6.7% and fast approaching the Fed’s threshold of 6.5% means perhaps that some new guideposts have to be provided beyond the previous ‘keeping rates low well beyond the 6.5% unemployment level threshold’. Alternatively, it’s also possible that this concept of forward guidance will be scrapped altogether.
As far as US economic statistics, the week’s top headline will be the advance 4th quarter GDP growth figures, which will also allow the first actual estimate of growth for 2013 as a whole. 4th quarter growth is expected to be announced on Thursday at a relatively robust 3.2%.
While on the topic of economic growth, 4th quarter economic growth for the UK will be announced on Tuesday and it is expected to show a relatively decent 0.7% quarter-on-quarter rate. Sterling has been weak following dovish comments by the Bank of England Governor so it will be interesting how economic growth statistics could affect its course.
With respect to the euro, Friday will be an important day, as flash inflation statistics will be released for January together with December’s unemployment rate. Eurozone inflation is expected to tick up to 0.9% from 0.8% in December and unemployment to remain at 12.1%. The pickup in inflation will be particularly key to watch; otherwise the calls for a rate cut will grow louder.
Friday will also see a whole host of statistics out of Japan that could influence the yen such as inflation, household spending, industrial output and jobs/ applicants ratio. The nationwide core inflation rate for December is expected at 1.2%.
Therefore, a very full and interesting week is ahead in terms of economic developments and statistics, at the same time that emerging markets are facing a lot of market pressure and volatility is rising.
Following a week that emerging markets started to face serious market pressure, a number of events is likely to have a major influence on foreign exchange trading this week.
First of all, the Federal Reserve will announce on Wednesday the result of its two days of deliberations. This will be interesting for a number of reasons. For people that are sensitive to leadership changes in monetary policy, this will be the last meeting during which Ben Bernanke will be the chair. Expect the media to be filled with evaluations of the Bernanke Fed’s actions in trying to stem the worst financial crisis of the last 80 years.
The market also expects the Federal Reserve to almost certainly reduce its monthly bond-buying stimulus by 10 billion dollars to 65 billion. What could be more interesting however- since more tapering is seen as almost a done deal – is what the Fed and its new leadership will start to say about forward guidance. The fact that unemployment is at 6.7% and fast approaching the Fed’s threshold of 6.5% means perhaps that some new guideposts have to be provided beyond the previous ‘keeping rates low well beyond the 6.5% unemployment level threshold’. Alternatively, it’s also possible that this concept of forward guidance will be scrapped altogether.
As far as US economic statistics, the week’s top headline will be the advance 4th quarter GDP growth figures, which will also allow the first actual estimate of growth for 2013 as a whole. 4th quarter growth is expected to be announced on Thursday at a relatively robust 3.2%.
While on the topic of economic growth, 4th quarter economic growth for the UK will be announced on Tuesday and it is expected to show a relatively decent 0.7% quarter-on-quarter rate. Sterling has been weak following dovish comments by the Bank of England Governor so it will be interesting how economic growth statistics could affect its course.
With respect to the euro, Friday will be an important day, as flash inflation statistics will be released for January together with December’s unemployment rate. Eurozone inflation is expected to tick up to 0.9% from 0.8% in December and unemployment to remain at 12.1%. The pickup in inflation will be particularly key to watch; otherwise the calls for a rate cut will grow louder.
Friday will also see a whole host of statistics out of Japan that could influence the yen such as inflation, household spending, industrial output and jobs/ applicants ratio. The nationwide core inflation rate for December is expected at 1.2%.
Therefore, a very full and interesting week is ahead in terms of economic developments and statistics, at the same time that emerging markets are facing a lot of market pressure and volatility is rising.
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