The main risk events for FX traders this week are centred on a couple of significant releases of detailed deliberations about the economy as conducted by key central banks. Both the ECB and the Fed are releasing minutes on Wednesday and Thursday with traders expecting some cues about the thinking of monetary policymakers.
The US Fed left interest rates unchanged at its latest meeting in July with only minor changes to its policy statement. The Federal Reserve’s Open Market Committee (FOMC) expressed some optimism about recent developments in economic trends. Still, they didn’t elaborate on what the Fed intends to do with the continuing asset purchase program currently running at $80 bln per month.
The ECB’s latest meeting was not much different to the Fed’s with little changes announced by policymakers. ECB officials suggested that the central bank may not use the full amount of asset purchases which announced in response to the COVID-19 pandemic. With increasing case numbers across Europe, such comments could have been premature.
Monday
The first day of the week starts with the Democratic National Convention in the US. Traders will look for cues on policy proposals from the democratic ticket as the likelihood for a win by Joe Biden, and Kamala Harris estimated at 71%. Any policy proposals that include significant fiscal expansion could boost stock prices and pressure the US dollar. The New York Fed releases its Manufacturing survey with expectations centred at 15.
Tuesday
The Reserve Bank of Australia will kick off a week of several central bank sentiment news announcements with minutes from the Australian central bank’s meeting scheduled for Tuesday morning. US building permits and housing starts are in focus during the New York session as the consensus estimate looking for 1.29 million new building permits and 1.169 million housing starts.
Wednesday
The main events on Wednesday start with the UK, and Eurozone CPI reports. With consensus estimates for 0.7% and 0.4% respectively, any surprises could bring short term volatility to GBP and EUR pairs.
The FOMC minutes are due for release at 18:00 GMT. During his press conference, Chairman Powell maintained a dovish tone with highlights about the lack of business investment follow up
to consumer spending. With continuing uncertainty about the outlook unlikely to disappear, traders will look for some clues as to the future pace of asset purchases by the Fed.
Thursday
The ECB’s meeting minutes are taking central stage on Thursday with the caveat that most of the announcement could be rather devoid on market-moving details. The usual jobless claims numbers from the US and the EU are followed closely by the US Philly Fed survey.
Friday
The final day of the trading week offers Australian PMI numbers, the latest Japanese CPI reading and some preliminary numbers for Eurozone, UK and US PMI numbers. The manufacturing and service sector activity is expected to have picked up further, albeit the pace remains uncertain due to the rising numbers of new coronavirus cases.
UK Retail Sales, EU Consumer Confidence, as well as US Existing Home Sales numbers are also on the radar, as trading desks wrap up for the week.
