Review of the main events of the Forex economic calendar for the next trading week (20.03.2023 – 26.03.2023)
Friday’s decline forced the dollar to end the week in negative territory. The DXY index lost 1% last week, dropping to the levels of 5 weeks ago. The fears and confusion that arose last week on the financial markets forced investors to turn again to defensive assets and the demand for them has grown significantly. Gold quotes rose by 2.7% just on Friday, and following the results of the past week, they gained 5.6% compared to the closing price a week earlier. If next week the unrest and fears caused by the threat of the collapse of the global banking system do not subside, the level of 2000.00 dollars per troy ounce of gold is within reach.
The interest in gold is also fueled by expectations of the outcome of the Fed meeting, which is scheduled for next week. What if Fed officials don’t raise interest rates at all at this meeting?
Next week, in addition to the Fed meeting, meetings of 3 more world’s largest central banks are sceduled – Switzerland, China and the UK. Market participants will also pay attention to the publication of important macro statistics from Canada, the UK, Germany, the Eurozone, and the US.
* during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.
** GMT time
Monday, March 20
01:15 CNY People’s Bank of China interest rate decision
Since May 2012, the People’s Bank of China has been steadily lowering the interest rate to provide support to Chinese manufacturers. The last time the bank lowered the rate was in August 2022 (by 0.1% to 3.65% at the moment).
In 2020, in the context of international trade conflicts and a slowdown in the global economy, the world’s largest central banks took the path of easing their monetary policies in order to support national economies and increase the competitiveness of goods exported from these countries.
The People’s Bank of China is also in line with this process. The depreciation of the yuan has become especially relevant in the last 4-5 years, when the confrontation between the two most powerful economies in the world began. One of the measures to offset the negative consequences of increased duties on the import of Chinese goods into the United States was the depreciation of the national currency of China. Such a measure was intended, among other things, to maintain the previous volumes of imports of Chinese products to the United States, which would be cheaper for American buyers due to the difference in the exchange rates of the national currencies of the United States and China.
Coronavirus has become an additional strong negative factor.
Probably, at this meeting, the People’s Bank of China will keep the interest rate at the same level of 3.65%, although unexpected decisions are not ruled out.
If the People’s Bank of China makes unexpected statements or decisions, volatility could increase throughout the financial market. Investors will also be interested in the bank’s assessment of the consequences of the coronavirus for the Chinese economy and its policies in the near future.
Tuesday, March 21
Due to the celebration of the Spring Equinox Day, Japanese banks and exchanges will be closed, which will affect trading volumes.
00:30 AUD Minutes of the last meeting of the RB of Australia
This document is published two weeks after the meeting and the decision on the interest rate. If the RBA is positive about the state of the labor market in the country, the GDP growth rate, and also shows a hawkish attitude towards the inflationary forecast in the economy, the markets regard this as a higher probability of a rate hike at the next meeting, which is a positive factor for the AUD. The bank’s soft rhetoric regarding, first of all, inflation puts pressure on the AUD.
During the recent (March 2023) meeting, the RBA again raised the interest rate, bringing it to the level of 3.60%. In addition, the RBA signaled the likelihood of a further increase in the coming months.
“The Board will do everything necessary to ensure that, over time, inflation in Australia returned to the target level,” said the governor of the central bank Philip Lowe. “This will require further interest rate hikes in the future.”
Thus, the Australian dollar received a new impetus to growth. However, if the published minutes contain unexpected information regarding RBA monetary policy issues, the volatility in AUD quotes will increase.
12:30 CAD Core Consumer Price Index in Canada
Core Consumer Price Index (Core CPI) from the Bank of Canada reflects the dynamics of retail prices of the corresponding basket of goods and services (excluding fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products). The inflation target for the Bank of Canada is in the range of 1%-3%. Growing CPI is a harbinger of a rate hike and positive for the CAD. The value of Core CPI in the previous month amounted to +0.3% (+5.0% in annual terms).
If the expected data turns out to be worse than the previous values, this will negatively affect the CAD. Data better than previous values will strengthen the Canadian dollar.
Forecast for February: +0.8% (+4.6% in annual terms).
Wednesday, March 22
07:00 GBP Consumer Price Index.Core Consumer Price Index
Consumer Price Index (CPI) reflects the dynamics of retail prices for a group of goods and services included in the British consumer basket. The CPI index is a key indicator of inflation. Its publication causes active movement of the pound in the foreign exchange market, as well as the index of the London Stock Exchange FTSE100.
In the previous reporting month (in January), the growth in consumer inflation amounted to +10.1% (in annual terms). The data suggests that inflationary pressures are still high, which is likely to support the pound. A value of the indicator below the forecast/previous value could provoke a weakening of the pound, as low inflation will force the Bank of England to maintain an easy monetary policy.
Forecast for February: +0.6% (+9.8% in annual terms).
Core Consumer Price Index (Core CPI) is published by the Office for National Statistics and determines the change in prices of a selected basket of goods and services (excluding food and energy) over a given period. It is a key indicator for assessing inflation and changing consumer preferences. A positive result strengthens the GBP, a negative result weakens it.
In January, Core CPI (in annual terms) increased by +5.8%. It is likely that the publication of the indicator will have a positive impact on the pound in the short term if its value is higher than the forecast and previous values. The indicator reading below the forecast and/or previous values may provoke a weakening of the pound.
Forecast for February: +5.8% (in annual terms).
18:00 USD The Fed’s interest rate decision. The Fed’s monetary policy statement. Summary of Economic Projections by the Federal Open Market Committee
In 2020, the dollar was declining, because investors were withdrawing funds from safe-haven assets buying more risky and profitable assets of the stock market, which continued to grow despite the threat of a second wave of the coronavirus epidemic and the associated economic slowdown. The role of the dollar as a defensive asset also declined. However, in 2021 the situation has changed – the dollar strengthened. Now market participants are waiting for the US central bank to continue the cycle of tightening monetary policy, but at an even slower pace.
As expected, at this meeting the rate will be raised again (by 0.25% to 5.00%). During the period of publication of the rate decision, volatility can increase sharply throughout the financial market, primarily in the US stock market and in dollar quotes, especially if the rate decision differs from the forecast or unexpected statements are received from the Fed management.
Powell’s comments could affect both short-term and long-term USD trading. A more hawkish stance on the Fed’s monetary policy is seen as positive and strengthens the US dollar, while a more cautious stance is seen as negative for the USD. Investors want to hear Powell’s opinion on the Fed’s plans for this year.
Traders should also look at the Fed’s report with forecasts for inflation and economic growth for the next two years and, no less important, individual opinions of FOMC members on interest rates.
18:30 USD Press conference of the FOMC (Federal Open Market Committee of the US Federal Reserve)
The press conference of the Federal Open Market Committee of the US Federal Reserve lasts about an hour. The first part reads the ruling, followed by a series of questions and answers that can increase market volatility. Any unexpected statements by Powell on the topic of the Fed’s monetary policy will cause an increase in volatility in dollar quotes and in the US stock market.
Thursday, March 23
08:30 CHF SNB’s decision on the interest rate. SNB’s Monetary Policy Statement
Before the June 2022 meeting of the SNB, the current deposit rate was in negative territory and amounted to -0.75%. However, at that meeting of the central bank, the rate was raised to the level of -0.25%.
In the accompanying statement, the head of the Swiss National Bank Thomas Jordan noted that the Swiss franc is no longer grossly overvalued and that “tighter monetary policy aims to prevent inflation from spreading more widely in Switzerland.”
The franc has largely lost its status as a safe-haven currency lately, and the threat of intervention is certainly holding back the franc from excessive growth. According to the leaders of the SNB, intervention in the foreign exchange market remains “an important means of maintaining the low attractiveness of investments in francs and easing upward pressure on the currency.”
The deposit rate is widely expected to be maintained at 1.00% following the March 2023 meeting.
Traders will also scrutinize the SNB’s statement for signals regarding the SNB’s future monetary policy plans. Tough rhetoric of the statement will help strengthen the franc. The SNB’s soft tone and propensity to continue its extra loose monetary policy will have a negative impact on the franc. High volatility is expected in the foreign exchange market and, above all, in the franc, if the SNB management makes unexpected statements.
12:00 GBP Bank of England’s interest rate decision. Minutes of the meeting of the Bank of England. Planned volume of asset purchases by the Bank of England. Monetary Policy Report
Following the results of the December meeting, the Bank of England unexpectedly raised its key interest rate to 0.25%, becoming the first leading central bank to increase the cost of borrowing since the start of the coronavirus pandemic. In February, the interest rate was raised to 0.50%, in March to 0.75%, in May to 1.00%, in December to 3.50%, and in February 2023 to 4.00%. Members of the Monetary Policy Committee felt that raising the cost of borrowing in a strong labor market to curb price increases was entirely appropriate. At the same time, further tightening of monetary policy may be required to bring inflation to the target level of 2.0%.
The Bank of England is expected to raise interest rates again at this meeting. However, despite the high level of inflation in the country and the fact that positive macro data is coming from the UK, the interest rate may remain at the same level of 4.00%, given the situation in Ukraine. Such a decision could cause a weakening of the pound.
Also at this time, the minutes of the Monetary Policy Committee (MPC) of the Bank of England are published with the votes “for” and “against” the increase / decrease in the interest rate. The main risks for the UK after Brexit are associated with expectations of a slowdown in the country’s economic growth, as well as with a large current account deficit in the UK’s balance of payments.
The intrigue about the further actions of the Bank of England remains. And in the pound and FTSE100 index futures trading, there are plenty of trading opportunities during the publication of the bank’s rate decision.
Also at the same time the Bank of England will publish the report on monetary policy containing an assessment of economic prospects and inflation. At this time, the volatility in the pound quotes can rise sharply. One of the main benchmarks for the Bank of England regarding the prospects for monetary policy in the UK, in addition to GDP, is the inflation rate. If the tone of the report is soft, then the British stock market will receive support, and the pound will fall. Conversely, the report’s tough rhetoric on curbing inflation, which implies a further increase in the interest rate in the UK, will lead to a strengthening of the pound.
Friday, March 24
08:30 EUR Manufacturing PMI of the German economy according to S&P Global (preliminary release). Composite PMI of the German economy according to S&P Global (preliminary release)
Manufacturing PMI is an important indicator of the business environment and the general state of the German economy. This sector of the economy forms a significant part of Germany’s GDP. A result above 50 is considered positive and strengthens the EUR, while one below 50 is considered negative for the euro.
Previous monthly values: 46.3, 47.3, 47.1, 46.2, 45.1, 47.8, 49.1, 49.3, 52.0, 54.8, 54.6, 56.9, 58.4, 59.8, 57.4, 57.4, 57.8, 58.4, 62.6, 65.9, 65.1, 64.4, 66.2, 66.6, 60, 7, 57.1, 58.3, 57.8. The growth of the indicator above the previous values will support the euro (in the short term). Data worse than the forecast and / or the previous value will have a negative impact on the euro.
Composite PMI is an important indicator of business conditions and the overall health of the German economy. A result above 50 is considered positive and strengthens the EUR, while one below 50 is considered negative for the euro. Previous monthly values: 50.7, 49.9, 49.0, 46.3, 45.1, 45.7, 46.9, 48.1, 51.3, 53.7, 54.3, 55.1, 55.6, 49.9, 52.2, 52.0, 55.5, 60.0, 62.4, 60.1, 56.2, 55.8, 57.3, 51.1, 50, 8, 52.0, 51.7. Data worse than the forecast and / or the previous value will have a negative impact on the euro.
09:00 EUR Composite Manufacturing PMI of the Eurozone economy according to S&P Global (preliminary release)
Manufacturing PMI is an important indicator of the state of the entire European economy. A result above 50 is considered positive and strengthens the EUR, while one below 50 is considered negative for the euro. Previous monthly values: 52.0, 50.3, 49.3, 47.8, 47.3, 48.1, 48.9, 49.9, 52.0, 54.8, 55.8, 54.9, 55.5, 52.3, 53.3, 55.4, 54.2, 56.2, 59.0, 60.2, 59.5, 57.1, 53.8, 53.2, 62.5, 48.8, 47.8, 49.1, 45.3. Data worse than the forecast and / or the previous value will have a negative impact on the euro.
09:30 GBP Services PMI of the UK economy according to S&P Global (preliminary release)
PMI in the UK services sector is an important indicator of the state of the British economy. The services sector employs the majority of the UK’s working-age population and contributes approximately 75% of GDP. The most important part of the service industry is still financial services. If the data turns out to be worse than the forecast and the previous value, the pound is likely to fall sharply in the short term. Data better than the forecast and the previous value will have a positive impact on the pound. At the same time, a result above 50 is considered positive and strengthens the GBP, while onw below 50 is considered negative for the GBP.
Previous values of the indicator: 53.5 in February, 48.7 in January, 49.9 in December, 48.8 in November, 48.8 in October, 50.0 in September, 50.9 in August, 52.6 in July, 54.3 in June, 53.4 in May, 58.9 in April, 62.6 in March, 60.5 in February, 54.1 in January, 53.6 in December, 58.5 in November , 59.1 in October, 55.4 in September, 55.0 in August, 59.6 in July, 62.4 in June 2021 after falling to levels of 29.0 in May, 13.4 in April, 34. 5 in March 2020.
12:30 USD Durable goods orders. Capital goods orders (ex defense and aviation)
This indicator reflects the value of orders received by producers of durable goods and capital goods (capital goods are durable commodities used to produce durable goods and services) involving large investments. Goods produced in the defense and aviation sectors of the US economy are not included in this indicator. A high result strengthens the USD.
Durable goods orders previous values: -4.5% in January, +5.6% in December, -1.7% in November 2022, +0.7%, +0.3%, + 0.2%, -0.1%, +2.2% in June, +0.8% in May, +0.4% in April, +0.6% in March, -1.7% in February , +1.6% in January.
Capital goods orders ex defense and aviation previous values: +0.8% in January, -0.1% in December, 0% in November 2022, +0.3% in October, -0.8 % in September, +0.8% in August, +0.3% in July, +0.9% in June, +0.6% in May, +0.3% in April, +1.1% in March, -0.3% in February, +1.3% in January.
In theory, the relative growth of the indicator has a positive impact on the dollar, and the decline of the indicator is negative. The market reaction to its negative value may also be negative for the dollar in the short term. Data worse than the previous value and/or the forecast will also have a negative impact on dollar quotes.
Better-than-expected data will have a positive impact on the dollar.
Forecast for February: +0.9% and 0%, respectively.
12:30 CAD Retail Sales Index
Retail Sales Index is published monthly by Statistics Canada and measures total retail sales. The index is often considered an indicator of consumer confidence and reflects the state of the retail sector in the short term. The growth of the index is usually a positive factor for the CAD; a decrease in the indicator will negatively affect the CAD. The previous value of the index (for December) +0.5%. If the data for January turns out to be weaker than the forecast and / or the previous value, the CAD may drop sharply in the short term.
Forecast for January: +0.7%.
Price chart of EURUSD in real time mode
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