Author: Sir Amar
A new week brings a new set of events that can bring volatility to the market. Let’s do a quick overview to see what to expect.
FEDERAL RESERVE’S CHAIRMAN SPEECH (JEROME POWELL) – JANUARY 10th
Fed Chair Jerome Powell will address a symposium hosted by the Riksbank in Stockholm on Tuesday, January 10 at 22:00 GMT+8. As Federal Reserve Chair, Controlling Short Positions -Forward rates in the United States, Powell has more leverage over the national currency than anyone else. Traders scrutinize their public commitments as they often provide clues as to future monetary policy. Hence, markets are always volatile when you speak.
According to the latest FOMC meeting minutes, hopes of a slow rate decline are fading, at least in the second half of 2023. The hawks are winning as Fed members will not change course of monetary policy. Powell’s next speech could either confirm or refute investors’ fears about the Fed’s interest rate ceiling. Last time, on November 30, during the Brooking Institution speech, Jerome Powell was more cautious. As a result, EURUSD surged, gaining 2% in one day.
US MONTHLY INTEREST RATE ANNOUNCEMENT – JANUARY 12th
The US Bureau of Labor Statistics will release the US Consumer Price Index (CPI) on January 12 at 21:30 GMT+8. The index measures a change in the price of goods and services purchased by consumers.
Currently, price stability is the Federal Reserve’s primary goal. Therefore, the announcement will have a significant impact on future Federal Reserve decisions. In November and December, real CPI m/m exceeded expectations, hitting 0.4% and 0.1% versus 0.3% and 0.6%, respectively.
As a result, the FOMC slowed the pace of rate hikes, raising the policy rate by just 50 basis points in December from 75 basis points at each of the previous three meetings. Higher than expected numbers are usually positive for USD and negative for XAU/USD. If actual numbers beat expectations, USD will fall and XAU/USD will rise higher.
UK GROSS DOMESTIC PRODUCTS (GDP) MONTHLY STATEMENT – JANUARY 13th
The UK Office for National Statistics will release Gross Domestic Product (GDP) on 13 January at 15:00 GMT+8. The indicator is the broadest measure of economic activity and the health of the economy as it measures a change in the total value of all goods and services produced by the economy.
Inflation in the UK remains one of the highest among the major’s European economies. As a result, the UK central bank sets the highest policy rate, outperforming the central banks of France, Spain and Germany. In these conditions, the UK economy struggled and GDP fell by 0.3% in September and 0.6% in October. However, November’s numbers beat expectations, pleasing investors with a possible economic recovery. As a result, GBPUSD gained over 2,000 points within three days of launch.
As such, a further drop in inflation could force the Fed to hike rates by 25 basis points at its next meeting on February 1, which will be positive for equities and detrimental to the US dollar. Higher than expected read will boost GBP. If real GDP data comes in below expectations, GBP will fall.