Last week, a substantial influx of data exerted pressure on the market. Notably, Janet Yellen from the U.S. government is currently in China, engaging in discussions aimed at fostering mutually beneficial agreements. A significant aspect of these discussions involves the issuance of long-dated treasury bonds by the U.S., with China and Japan traditionally being the largest foreign buyers of these treasuries. Yellen’s objective is to ensure the continuation of this trend. China, in turn, has a vested interest in maintaining lower interest rates and a weakened Dollar to uphold control over its domestic currency. These negotiations set the stage for potential market developments.
Last week’s market landscape featured robust manufacturing data for the U.S., contrasting with weaker services PI indicators. Additionally, mixed signals from various Federal Reserve speakers contributed to market uncertainty, alongside a positive surprise in non-farm payroll data released on Friday. The GBPUSD closed the week trading at 1.2630.
Looking ahead to the current week, several pivotal data releases are anticipated, which could significantly influence market dynamics. Monday and Tuesday are expected to be relatively clear of major events, allowing for general trading activities and responsiveness to any pertinent news releases. Key geopolitical issues to monitor include developments in Russia & Ukraine and Israel & Iran.
Wednesday marks the commencement of significant events, beginning with the Reserve Bank of New Zealand’s interest rate decision. While no changes are expected, the possibility of future cuts looms, aligning with broader global monetary policy trends. Subsequently, attention shifts to U.S. inflation data, with a moderate decrease of 3.7% forecasted for core inflation. This is unlikely to exert significant market impact. Concurrently, the Bank of Canada will announce its interest rate decision, with no cuts expected but potential market movements contingent on any forward guidance provided. Later in the day, focus turns to the release of the Federal Open Market Committee (FOMC) minutes, potentially influencing market sentiment regarding future interest rate adjustments.
Thursday’s highlight is the European Central Bank’s interest rate decision. Although no cuts are anticipated, attention will be on the accompanying press conference for indications of future policy shifts. The EURUSD pair, currently trading at 1.08 following a recent rebound, could retreat to the 1.07 range if the ECB hints at potential cuts, with Dollar weakness being the primary driver for upward movement. Additionally, noteworthy Fed speeches are scheduled for Thursday evening from Bostic and Collins.
Friday’s agenda includes the release of UK GDP data, crucial following previous negative figures confirming the UK’s recessionary status. Market hopes are pinned on positive GDP figures, which could overshadow industrial and manufacturing production data released simultaneously, potentially bolstering the Pound’s performance throughout the morning.