Sunday May 1, 2016 - 12:55:42 GMT
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Central Bank Roller Coaster
John M. Bland, MBA, CTA
Central Banks Never Fail To Generate Volatility
Traditionally, Central Banks have typically viewed as a source of market stability, but their role in the global economy ever since the start of the global financial crisis has grown to the point where any public utterance is a major event. In the most recent week, the Fed announced no change in interest rates, as expected, but by removing a reference to "global conditions" in its policy statement, it sent a signal that an interest rate hike is back on the table under the proper circumstances. I still feel a rate hike as early as June is a long shot.
Early Thursday, the Bank of Japan shocked the markets by leaving monetary policy steady. Major earthquakes in the south of Japan and a sluggish economy had most observers feeling that further ease was a sure thing. The reaction of the markets afterwards, which saw the JPY register large gains was a testament to how poorly the meeting. Subsequently, we have been seeing telltale signs the Bank of Japan has been in trying to reestablish a floor under the USDJPY.
Current Market Conditions
Forex trading remains a rollercoaster ride with little continuity from one week to the next. At the close of last week it appeared that EURUSD was set for a test of the 1.1200 line and perhaps lower. As of the close of the current week it is looking like the 1.1500 line on top is could be at risk. One currency worth noting is the JPY. When the BOJ recently cut rates, the yen gained. Now this week the BOJ does not hike and the unit rises as well. The reason is the behavior of Japanese investors who tend to repatriate funds back home whenever monetary policy is in play. Many have funds invested abroad due to the low level of Japanese interest rates which has persisted for many years.
WEEKLY HIGH IMPACT NEWS:
22:30 AU- PMI (late Sunday)
All Day- Final MFG PMIs
01:45 CN- Caixin PMI
4:30 AU- RBA Decision
8:28 GB- Mfg PMI
All Day- Final SVC PMIs
12:15 US- ADP Jobs
14:30 US- EIA Crude
8:28 GB- SVC PMI
12:30 CA/US- Employment
12:30 CA- Retail Sales
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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