Review of the main events of the Forex economic calendar for the next trading week (14.03.2022 – 20.03.2022)
The dollar strengthened again following the results of the past week. Investors prefer it to the defensive yen and gold, whose quotations last week exceeded almost a 2-year high, rising to the level of 2070.00 dollars per ounce.
Uncertainty in connection with the events in Ukraine and the rapid growth of inflation continue to worsen investor sentiment. Last Thursday, the ECB left the current monetary policy unchanged. Central bank president Christine Lagarde acknowledged that “economic activity could be substantially dampened” by military action in Ukraine. ECB leaders lowered their forecast for Eurozone economic growth in 2022 from 4.2% to 3.7% (a more negative scenario suggests growth of 2.3%).
The focus of traders next week will be the Fed’s meeting, which will end with the publication of the decision on rates on Wednesday (at 18:00 GMT). Fed chief Jerome Powell said in a recent speech to Congress that he would support a quarter-point rate hike at the March 15-16 meeting. If before the start of the military special operation in Ukraine, the markets expected that the rates would be raised seven times, now they are predicting four or five increases, and the Fed’s rate hike of 25 basis points has already been priced in.
Meanwhile, according to the US Department of Labor, the consumer price index (CPI) in February showed an annual increase of 7.9% (against 7.5% in January and economists’ forecast of growth of 7.8%), which is the most significant annual growth since January 1982. In spite of this,
The Fed is likely to tighten monetary policy this year not as aggressively as expected, given the impact of events in Ukraine on the global economy.
In addition to the Fed meeting, investors next week will also pay attention to the publication of important macro statistics for the UK, US, Canada, New Zealand, Australia and the results of meetings of the central banks of the UK and Japan. There will probably be no surprises here. Daylight Savings Time starts next week in the US. Europe will switch to daylight saving time a week later.
*during the coming week, new events may be added to the calendar and / or some scheduled events may be canceled
Monday, March 14
No important macro statistics scheduled to be released.
Tuesday, March 15
00:30 AUD Minutes of the March meeting of the Reserve Bank 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, GDP growth rates, 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 primarily inflation puts pressure on the AUD.
During a recent (March) meeting, the RBA kept its key interest rate at 0.10% and reiterated that it would not tighten policy until inflation stabilizes within the target range of 2%-3%. The bank also noted that the crisis in Ukraine has further clouded the outlook for the global economy. “The military operation in Ukraine is a major source of uncertainty,” the RBA Governor Philip Lowe said. “Prices of many commodities have risen further due to the conflict. In some countries, inflation has accelerated sharply due to soaring energy prices and supply chain disruptions during a period of strong demand.”
At the same time, the RBA does not intend to raise interest rates until inflation stabilizes within the target range of 2%-3%. According to the head of the RBA Philip Lowe, there are still “no serious arguments in favor of tightening monetary policy in the short term.” In his opinion, “before the increase in interest rates will take some time.”
However, if the published minutes contain unexpected information regarding monetary policy issues, the volatility in the AUD quotes will increase.
02:00 CNY Retail Sales Index
Retail Sales Index is published monthly by China’s National Bureau of Statistics and evaluates the total volume of retail sales and cash generated. The index is often considered an indicator of consumer confidence and economic well-being and reflects the state of the retail sector in the near term. The growth of the index is usually a positive factor for the CNY; a decrease in the indicator will negatively affect the CNY. The previous value of the index (in annual terms) was +1.7% (after an increase of +8% in the last months of 2019 and a fall of -20.5% in February 2020). Outlook: In February 2022, retail sales in China grew by +2.8% (yoy), indicating an ongoing recovery, albeit at a slower pace than in the previous months of 2021, after a strong fall in February-March 2020 of the year. If the data turns out to be better, the CNY will strengthen even more.
07:00 GBP Report on the average wages of the British for the last 3 months. Unemployment rate
Every month, the Office for National Statistics (ONS) publishes a report on average wages, including the period for the last 3 months, with and without bonuses.
This report is a key short-term indicator of the dynamics of wages in the UK. Wages growth is a positive factor for the GBP, while the low value of the indicator is negative. Forecast: The March report suggests that the average wages with bonuses rose again in the last calculated 3 months (November-January), by +4.9% after an increase of +4.3%, +4.2%, +4.9%, +5.8%, +7.2%, +8.3%, +8.8%, +7.3%, +5.6%, +4.0% in previous periods); without bonuses – also increased by +4.1% after growth by +3.7%, +3.8%, +4.3%, +4.9%, +6.0%, +6.8%, +7.4%, +6.6%, +5.6%, +4.6% in previous periods). Thus, the data points to the continued growth of wages, which is a positive factor for the pound. If the data turns out to be better than the forecast and / or previous values, the pound is likely to strengthen in the foreign exchange market. Data worse than forecast/previous values will have a negative impact on the pound.
Also at this time, data on unemployment in the UK are published. It is expected that for 3 months from November to January, unemployment was at the level of 4.0% (against 4.1%, 4.2%, 4.3%, 4.5%, 4.6%, 4.7%, 4.8%, 4.7%, 4.8%, 4.9%, 5.0%, 5.1%, 5.0% in previous periods).
Since 2012, the UK unemployment rate has steadily declined (from 8.0% in September 2012). This is a positive factor for the pound, the rise in unemployment is a negative factor.
If the data from the UK labor market turns out to be worse than the forecast and / or the previous value, the pound will be under pressure.
In any case, at the time of publication of data from the British labor market, an increase in volatility in the pound quotes and on the London Stock Exchange is expected.
Wednesday, March 16
12:30 USD Retail sales. Retail control group
This report (Retail Sales) reflects the total sales of retailers of all sizes and types. The change in retail sales is the main indicator of consumer spending. The report is a leading indicator and data may be heavily revised in the future. A high result strengthens the US dollar, a low result weakens it. A relative decrease in the indicator may have a short-term negative impact on the dollar, and an increase in the indicator will have a positive effect on the USD. In the previous month (January), the value of the indicator was +3.8% (after falling by -1.9% in December, rising by +0.2% in November, +1.8% in October, +0.8% in September, +0.9% in August), which indicates that the improvement in this sector of the American economy is still unstable. February forecast: +0.6%.
Retail sales is the main indicator of consumer spending in the US showing the change in retail sales. The Retail Control Group measures volume across the entire retail industry and is used to calculate price indices for most products. A high result strengthens the US dollar, and vice versa, a weak report weakens the dollar. A slight increase in indicators is unlikely to accelerate the growth of the dollar. The data worse than the previous period (+3.8% in January, -3.1% in December, -0.1% in November, +1.6% in October, +0.5% in September, +2.6 % in August) may negatively affect the dollar in the short term.
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%. The rising CPI is a harbinger of a rate hike and positive for the CAD. Core Consumer Price Index rose in January 2022 by 0.8% (+4.3% 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: +0.6% (+4.8% in annual terms).
18:00 USD The Fed’s interest rate decision. The Fed’s comments on monetary policy. Summary of Economic Projections from the Federal Open Market Committee of the US Federal Reserve
In March 2020, the Fed cut interest rates sharply (to 0.25% from 1.75% in February) and also announced a $700 billion plan to buy US government bonds and mortgage-backed securities. Subsequently, the Fed repeatedly announced additional measures to support the US economy and inject cheap liquidity into the financial system. Usually, with the easing of monetary policy, the national currency becomes cheaper and its quotes decrease.
In 2020, the dollar was declining because investors were withdrawing funds from safe-haven assets, buying riskier and more 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 dollar strengthened, which was associated with an increase in the yield of US government bonds, and the Fed has not yet reacted to this. Now market participants are waiting for the US central bank to accelerate the curtailment of the stimulus program so that it can then move on to raising interest rates. If everything goes according to plan, the Fed’s first interest rate hike could happen as early as this meeting.
It is widely expected that the rate will be raised by 0.25% at this meeting. However, during the period of publication of the rate decision, volatility may rise 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 will also pay attention to the Fed 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)
The press conference of the Federal Open Market Committee lasts about an hour. The first part contains the reading of the ruling, followed by a series of questions and answers that can increase market volatility. Any hints from Powell about the possibility of changing the current monetary policy will cause an increase in volatility in dollar quotes and on the US stock market.
21:45 NZD New Zealand GDP for the 4th quarter
The publication of the data will cause increased volatility in the NZD. Considering the recent rise in prices for commodities and agricultural products (especially for dairy products, which are the most important component of New Zealand exports), and the fact that the coronavirus pandemic has affected New Zealand the least compared to other major economies, it is likely that New Zealand’s Q4 GDP report will come out with positive figures.
GDP is expected to grow in the 4th quarter of 2021 (previous values -3.7%, +2.8%, +1.6%, -1.0%, +13.9%, -11%, -1.2%, +0.1%). Previous values in annual terms: +17.4%, +2.4%, -0.9%, +0.2%, -11.3%, 0%, +1.7%. The data so far remain conflicting, although they indicate a continued gradual recovery of the New Zealand economy after its fall in the first half of 2020. Data worse than previous values will negatively affect NZD quotes.
Thursday, March 17
00:30 AUD Employment rate. Unemployment rate
The employment rate reflects the monthly change in the number of employed Australians. The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high value is positive for the AUD, while a low value is negative. Forecast: in February, the number of employed Australian citizens increased (after rising by +12,900 in January, +366,100 in November, falling by -46,300 in October, -138,000 in September, -146,300 in August 2021).
Also at the same time, the Australian Bureau of Statistics will publish a report on the unemployment rate – an indicator that assesses the ratio of the unemployed population to the total number of able-bodied citizens. The growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. The decrease in the indicator is a positive factor for the AUD. Forecast: Unemployment in Australia was at 4.1% in February (against 4.2% in January and December, 4.6% in November, 5.2% in October, 4.6% in September), approaching pre-coronavirus levels levels.
The RBA officials have repeatedly stated that in addition to the situation in international trade, the Australian economy and the central bank’s monetary policy plans are affected by indicators of the level of debts and household spending, growth in wages of workers, as well as the state of the country’s labor market. If the values of the indicators turn out to be worse than the forecast, the Australian dollar may decline significantly in the short term. Better-than-expected data will strengthen the AUD in the short term.
12:00 GBP Bank of England interest rate decision. Minutes of the meeting of the Bank of England. The 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%. Members of the Monetary Policy Committee considered it appropriate to increase the cost of borrowing in a strong labor market to contain price increases. At the same time, further tightening of monetary policy may be required to bring inflation to the target level of 2.0%.
It is possible that at this meeting the Bank of England will again raise the interest rate (up to 0.75%), while maintaining the volume of purchases of government bonds at the same level of 895 billion pounds. However, despite the very positive macro data coming out of the UK, the interest rate is likely to remain at the same level of 0.50%, given the situation in Ukraine.
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 trading the pound and FTSE100 index futures, 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, 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 18
03:00 JPY Bank of Japan interest rate decision. Bank of Japan Press Conference and Comments on Monetary Policy
The Bank of Japan will decide on the interest rate. At the moment, the main rate in Japan is in negative territory, amounting to -0.1%. Most likely, the rate will remain at the same level. If it is cut and deepens into negative territory, such a decision will cause a sharp decline in the yen in the foreign exchange market and an increase in the Japanese stock market. In any case, a jump in volatility in the yen and the Asian financial market is expected during this period of time.
Since February 2016, the Bank of Japan has kept the deposit rate at -0.1%. The yield target for 10-year bonds is currently in the 0% area. One of the recent accompanying statements from the Bank of Japan said that the bank’s management will continue to “increase the monetary base until inflation is stable above 2%.” “We will not hesitate to take additional easing measures if necessary,” the bank also traditionally said in a statement.
During the press conference, the head of the Bank of Japan Haruhiko Kuroda will comment on the bank’s monetary policy. The Bank of Japan continues to adhere to its ultra-soft monetary policy. As Kuroda has repeatedly stated before, “it is appropriate for Japan to patiently continue the current loose monetary policy.” Markets usually react actively to Kuroda’s speeches. He will probably again touch upon the topic of monetary policy in his speech, which will cause an increase in volatility not only in yen trading, but throughout the Asian and global financial markets.
If bank officials decide that the Japanese economy is stable and inflation momentum towards the 2% target is not diminishing, they will refrain from changing policy.
06:00 JPY Bank of Japan press conference
During the press conference, head of the Bank of Japan Haruhiko Kuroda will comment on the bank’s monetary policy. Despite earlier measures taken by the bank to stimulate the Japanese economy, inflation remains low, production and consumption are falling, which negatively affects export-oriented Japanese manufacturers. Markets usually react actively to Kuroda’s speeches. If he touches on the topic of monetary policy during his speech, volatility will increase not only in trading on the yen, but throughout the Asian and global financial markets.
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) was -1.8%. 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: -2.1%.
Price chart of GBPUSD in real time mode
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