Weekly data: the Fed’s minutes and regional inflation
The new week in markets started quietly after various major shares made gains last week and the People’s Bank of China kept its base rates on hold as widely expected.
Some of the highlights on the calendar this week include minutes from the latest meeting of the Federal Open Market Committee (‘the Fed’) and the British government’s autumn statement. This preview of weekly data looks at the charts of and events affecting USDCAD and GBPJPY.
There wasn’t much activity among central banks last week although American inflation declined more than expected. That supports the generally strong impression among traders that the Fed has reached its final rate for this cycle and could start cutting in the second quarter of next year. According to CME FedWatch Tool, there’s a 99.8% chance of a hold at the Fed’s next meeting on 13 December; a plurality of traders expects a single cut to 5-5.25% on 1 May 2024.
This week the main events in monetary policy are minutes from the Fed and the Reserve Bank of Australia. The South African Reserve Bank is also likely to hold its base rate at 8.25% on Thursday while the Sveriges Riksbank is expected to hike to 4.25% that morning.
The most important regular releases of data this week are Canadian and Japanese inflation on Tuesday and Thursday respectively. Traders also anticipate the British autumn statement on Wednesday around lunchtime GMT, not least because of the dramatic results of last year’s statement on British financial markets.
US dollar-Canadian dollar, daily
Dollar-loonie moved somewhat lower last week amid lower inflation in the USA and a recovery by crude oil last Friday. Both the Fed and the Bank of Canada seem to be finished with hiking for the foreseeable future barring a sudden return of inflation. Preliminary third-quarter GDP for Canada shows no change, the same as the second quarter, so fundamentally the USA’s economy is doing better with surprisingly strong growth of 4.9% last quarter based on the advance release.
‘The trend is your friend’ seems to apply on the chart, with the relatively gentle uptrend active for more than two years although the price has extended quite far above the white trendline. The technical entry for buyers seems to be quite good, with no sign of buying saturation and the price reasonably far below the latest high around $1.38. However, if Canadian inflation this week is higher than expected, there might be a retreat. $1.365 could be an important near-term support.
Key data this week
Bold indicates the most important releases for this symbol.
Tuesday 21 November
● 13.30 GMT: Canadian annual headline inflation (October) – consensus 3.2%, previous 3.8%
● 13.30 GMT: Canadian annual core inflation (October) – consensus 2.6%, previous 2.8%
● 19.00 GMT: minutes from the Federal Open Market Committee
Friday 24 November
● 13.30 GMT: Canadian monthly retail sales (September) – consensus nil, previous negative 0.1%
Pound-yen, daily
Nervousness has been high among traders of the pound this week as the autumn statement approaches. Last year’s uncosted statement panicked traders and drove the pound to its weakest point in more than 30 years. While the Bank of Japan remains committed to loose monetary policy, the Bank of England might now be finished with hiking for this cycle given good progress on inflation.
Although there’s no indication yet that the main sideways trend active since early summer will end, further losses seems to be possible. The price is close to the upper boundary of the trend and has recently emerged from overbought. Currently the 20-day moving average is being tested. Logically, one would expect this chancellor to be more careful with his statement to Parliament since the memories of last year and his predecessor’s exit should be quite fresh. However, sentiment might be more important than the actual content, so traders might do well to prepare for volatility and avoid large speculative positions around the chancellor’s speech.
Key data this week
Bold indicates the most important releases for this symbol.
Wednesday 22 November
● c.13.00 GMT: Chancellor Jeremy Hunt’s autumn statement to Parliament
Thursday 23 November
● 23.30 GMT: Japanese annual headline inflation (October) – consensus 3.2%, previous 3%
● 23.30 GMT: Japanese annual core inflation (October) – consensus 3%, previous 2.8%
Friday 24 November
● 0.01 GMT: British GfK consumer confidence (November) – consensus negative 27, previous negative 30
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