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.
US FOMC INTEREST RATE DECISION – NOVEMBER 3rd
The Federal Reserve will provide an update on interest rates and monetary policy on Thursday morning, November 3 at 2:00 GMT+8. As usual, the release of the FOMC statement and Federal Funds Rate will be followed at 2:30 GMT+8 by a press conference with Fed Chair Jerome Powell. The Federal Reserve will issue the FOMC statement eight times. a year. Contains FOMC members’ voices on interest rates, monetary policy actions, current economic conditions and other prospects. The interest rate decision of is generally valued in line with the market. Traders are therefore tracking changes in the statement and trying to predict the Fed’s next move. This is one of the biggest events for the market right now.
The Federal Reserve is in the midst of battling high inflation, which was 8.2% in August versus 8.3% but above market forecasts for 8.1%. Analysts expect the regulator to hike interest rates by 75 basis points to 4% at the meeting. At the same time, traders will be on the lookout for signs of a slower pace of rate hikes in the upcoming sessions as inflation eases. Some Fed speakers have already expressed caution in their speeches. The USD was very volatile during the event last time. For example, EURUSD fell right after the update, then stabilized during the Fed Chair’s press conference and eventually fell back to daily lows. If the US Federal Reserve signals more significant rate hikes in the future, the USD will appreciate. But USD will fall if otherwise.
UK BOE INTEREST RATE DECISION – NOVEMBER 3rd
The Bank of England will publish the Monetary Policy Summary on Thursday, 3 November at 20:00 GMT+8, containing the outcome of the Monetary Policy Committee’s vote on interest rates. Each month, the Bank of England decides on monetary policy based on the current economic situation and future prospects. With the interest rate decision usually priced into the market, traders watch for signs of future changes in the monetary policy summary. The previous weeks have been intense for sterling First, Liz Truss unveiled the controversial tax cut plan that led to a led to a sharp sell-off in the British pound. Second, she couldn’t handle the pressure and resigned. Her place in Downing Street Cabinet was eventually taken by former Finance Secretary Rishi Sunak, who is said to be “friendly” to markets.
Overall, the pound regained strength, reversing September’s losses by more than 3%. Now it’s the Bank of England’s turn to shake up the British currency. The bank is expected to raise interest rates by 50 basis points to 3%. While the market is now pricing in the interest rate beyond 5% in 2023, some experts question the possibility of this scenario. According to them, an interest rate above 5% will damage the economy. So, if the bank hints at changes in the upcoming interest rate decisions, the GBP will be volatile. Last time the meeting was almost a non-event for the pound, as the BOE released everything in line with the forecasts.
US NON-FARM PAYROLLS (NFP) – NOVEMBER 4th
The United States releases Nonfarm Payrolls (NFP), also known as Nonfarm Employment Change, on Friday, November 4 at 20:30 GMT+8. As usual, the release is followed by two other key indicators: average hourly earnings and the unemployment rate. NFP represents the change in the number of people employed in the previous month excluding agriculture. This is the latest US employment data to help analyze current economic conditions in the country. Because of its early expiration, it tends to generate a lot of intraday volatility in USD, US stocks and gold.
Significant salary changes (average hourly wage) and the unemployment rate are also impacting the market. During the previous release, a combination of explosive NFP numbers (263k vs. 248k expected) lowered the expected unemployment rate (3.5% versus forecast of 3.7%) and stable average hourly wages supported the US dollar. Will it happen again? If the release is higher than forecast, USD will rise. If the release is weaker than forecast, USD will fall. Instruments that are likely to be trade during this time are XAU/USD, USD/JPY, and GBP/USD.