Week Ahead » Central Bank Monitoring and the Earnings Season
Last week it was all about central bank monetary policy. This week is about following up on the decisions made at these meetings and their impact on forex.
Last week was all about central bank activity. The Reserve Bank of New Zealand (RBNZ) raised rates by 50 basis points, the Bank of Canada (BOC) by 50 basis points and the European Central Bank (ECB) did nothing. However, due to central bank activity (or inactivity in the case of the ECB), the currency of each and every one of its countries was on the move. This week, these 3 countries publish data on inflation. Will their currencies continue to move in the same direction in forex this week or will they reverse?
Additionally, the Q1 earnings season kicks into high gear as we see the exits of top FAANG, Netflix, as well as Tesla stocks. Additionally, China has a data dump on Monday. Will China continue to show a slowdown due to the “Zero-covid” policy?
Central banks
The Reserve Bank of New Zealand met last week and surprised markets with a 50 basis point hike to take the OCR to 1.5%. It was the first 50 basis point increase in more than 20 years. They added that monetary conditions should continue to be tightened.
However, the central bank also added that the 50 basis point hike was intended to ensure that high inflation does not become embedded in longer-term inflation expectations.
Essentially, the central bank has increased more now to keep inflation expectations low. Given the conservative sentiment in the statement, the New Zealand dollar sold off. This week, New Zealand releases the CPI for the first quarter. Will New Zealand dollar reverse in forex and move higher?
The Bank of Canada also met last week and raised interest rates by 50 basis points to 1%. Additionally, the Bank of Canada said it would stop reinvesting the proceeds of its maturing bonds beginning April 25, ending its quantitative easing program. Additionally, the Bank of Canada said it will have to raise interest rates to neutral (now 2.5% from 2.25% previously) or above neutral due to the expected rise in inflation. . The central bank also raised its inflation forecast for 2022 to 5.3% from 4.2% in January.
The Canadian dollar made an offer immediately following the release of the release and the press conference. Canada releases CPI data this week. Will the Canadian dollar reverse on forex and fall? Or will it continue to rise, especially if the price of oil continues its recent rise?
The European Central Bank met on Thursday and disappointed the markets. The ECB said it would continue buying bonds at the predetermined rate of 40 billion euros in April, 30 billion euros in May and 20 billion euros in June. In addition, the central bank said it would continue to reinvest proceeds from maturing securities for an extended period beyond the data when it begins to raise interest rates. Traders were hoping the ECB would sooner announce the end of the QE program, or at least announce a date when it would stop reinvesting the proceeds (letting bond holdings shrink). The euro sold off aggressively in forex after the statement and press conference. This week, the EU announces its final March CPI reading. The preliminary reading was 7.5% year-on-year. If this week’s reading is stronger, will the euro’s course reverse in forex?
Business results
While the big news for stocks last week may have been Elon Musk’s hostile takeover attempt of Twitter, this week’s story will be about corporate earnings. Among FAANG stocks, Netflix will release its quarterly report this week.
Recall last quarter that the Steam online service disappointed investors by adding just 2.5 million subscribers compared to Wall Street estimates of 8.3 million. In addition to Netflix, other big names released their earnings this week, including BK, TSLA, and SNAP. Other companies to pay attention to this week are: BAC, BK, SCHW, SAVE, LMT, NAL, NFLX, JNJ, AA, UAL, PG, TSLA, AAL, T, BX, SNAP, AXP, VZ.
Economic data
As mentioned above, New Zealand, Canada and the European Union will all release inflation data this week. In addition, China will release several economic data on Sunday, which should indicate to the markets if the slowdown has stopped. Keep in mind that this data is from before the Shanghai lockdown. Other important economic data this week include RBA minutes, US housing data and global manufacturing and services PMIs. Key economic data due for release this week include:
Sunday – April 17, 2022
China: GDP growth rate (Q1)
China: Industrial Production (MAR)
China: Retail sales (MAR)
Monday – April 18, 2022
United States: NAHB Housing Market Index (AVR)
United States: Speech by Bullard, member of the FOMC
New Zealand: NZ PSI Services (MAR)
Australia: RBA Meeting Minutes
Australie : HIA New Home Sales (MAR)
Tuesday – April 19, 2022
Japan: Final Industrial Production (FEV)
Canada: Housing starts (MAR)
United States: Housing starts (MAR)
United States: Building permit (MAR)
Japan: Trade balance (MAR)
Wednesday – April 20, 2022
Germany: PPI Producer Price (MAR)
EU: Trade Balance (FEB)
EU: Industrial Production (FEV)
Canada : IPC (MAR)
Canada: New Housing Price Index (MAR)
United States: Existing Home Sales (MAR)
United States: Fed Beige Book
Crude Oil Inventories
New Zealand: CPI (Q1)
Australia: Prel Retail Sales (MAR)
Thursday – April 21, 2022
UE : IPC final (MAR)
United States: Philadelphia Fed Manufacturing Index (APR)
United States: Weekly jobless claims
United States: Speech by Powell, Chairman of the Fed
EU: Speech by Lagarde, President of the ECB
Flash Global Manufacturing and Services PMI (APR)
Japan : CPI (MAR)
Friday – April 22, 2022
UK: Retail Sales (MAR)
Mexico: Mid-Month CPI (AVR)
Canada: Retail Sales (FEB)
Canada : IPP (MAR)
EU: Speech by Lagarde, President of the ECB
United Kingdom: BOE Governor Bailey speaks
To see ” Economic Calendar
Forex chart of the week » Monthly USD/JPY
After crossing above a descending trendline dating back to January 2002 last month, the price of the pair USD/JPY hit its highest level in the forex since May 2002 this week, hitting a high near 126.50. Can USD/JPY go higher?
Current levels are traditionally where government officials start trying to lower the level of pairs including the Japanese Yen. Already last week, no less than 4 officials have come out and said in various forms that “sudden movements in currency effects are undesirable” and that they are “watching the recent depreciation of the yen with vigilance. »
This is done to try to “bring down” the market, or “push” pairs including the yen down. The Bank of Japan also has the ability to enter the forex and directly buy yen in order to lower the level of yen pairs. The next level of resistance for USD/JPY is the psychological resistance of the round number at 130.00.
Above this is a horizontal resistance dating back to February 2002 near 131.84. However, note that the RSI on the monthly timeframe is in overbought territory, indicating the possibility of a short-term pullback. If the price is falling, the first support is the March high at 125.10. Below, the price may fall back to the long-term trendline near 121.00.
Last week it was all about central bank monetary policy. This week is about following up on the decisions made at these meetings. Additionally, its earnings season and the markets will see results from companies such as Netflix and Tesla. These companies could set the table of expectations for earnings releases in the future.
Par Joe Perry, CMT, FOREX.com » Official site
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