Saturday November 28, 2015 - 11:51:00 GMT
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Upcoming: Decisive Week For Forex Markets
John M. Bland
Busy Week In Store
The week ahead is shaping up to to be a critical one for the markets as it could see the resolution of major outstanding issues. President Draghi of the European Central Bank hinted at policy ease at the policy board meeting on Thursday. We should see what decision has been made this week. No final policy resolution will be seen from the Fed this week, but Fed Chair Yellen will testify twice before Congress and the critical November Employment report will be released on Friday. By the close of the week we should have gotten a definitive signal about whether the Fed will be hiking rates on December 16. Higher U.S. interest rates while Eurozone rates are easing could set the stage for further price erosion of the EURUSD.
Current Market Developments
As can be seen in the chart above, interest rate markets differentials continue to price in falling Eurozone interest and rising U.S. rates. The differential in two-year yields is illustrated by the green line. The brown line is the value of the EURUSD pair. It is clearly evident how responsive its value is to changes in these key rates. It should also be evident that the major move is typically made in ANTICIPATION of policy decisions. After the fact moves usually anticipate the NEXT move. I feel that we will be in for a period of policy stability after the Fed and ECB make their expected policy decisions in early December.
The upcoming week is a relatively quiet period for major economic data.
-- Monday November 30, DE- flash HICP, US- Pending Homes Sales
-- Tuesday December 1, CN- PMI, AU- RBA Decision, DE- Jobless, EZ- mfg PMi, GB- mfg PMI, US- mfg PMI
-- Wednesday December 2, DE- flash HICP, ADP Payrolls, CA- BOC Decision, US- Yellen Testimony
-- Thursday December 3, EZ/GB/US- Service PMIs, EZ- ECB Decision, US- Yellen Testimony
-- Friday December 4, US- Employment, Trade, CA- Employment
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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