Forex » Upcoming Week September 25-30, 2022

Will the upcoming forex week be as volatile as last week?

Last week there were important events that caused some volatility in the forex market. The most significant events were a 75 basis point increase in the FOMC interest rate to bring the federal funds rate to 3.25%, a 50 basis point increase in the Bank of England to raise the key rate to 2.25%, and intervention by the Bank of Japan. in the foreign exchange markets to stop forex losses for the yen. Markets should expect more impact and volatility from these events this week. In addition, the pound was in free fall in the foreign exchange market on Friday after Chancellor of the Exchequer Kwasi Kwarteng released a mini crisis budget. Will the sale continue this week? Plus, this week is the end of the month and the end of the quarter! Check out the live EU CPI for September and the US core CPI for August, both due on Friday to keep up with the latest inflation updates!

Federal Reserve

The US Federal Reserve raised the federal funds rate by 75 basis points, bringing the key rate to 3.25%. In addition, the Fed’s “dot charts,” which show where Fed members think interest rates are heading, recorded an average increase of 125 basis points by the end of 2022. trip in December. The central bank also raised its inflation forecast and lowered its GDP forecast. Fed Chairman Powell said at his press conference that his main message from Jackson Hole has not changed: “We will fight inflation until we get it down to 2%.” In addition, Powell said the Fed hopes to return to “fairly restrictive” rates. The Fed is still in aggressive bullish mode, even if it triggers a recession. This sent equities and gold down while the US dollar and yields continued to rise. Will there be a continuation this week or will profit-taking follow?

Bank of Japan

The Bank of Japan did nothing at its interest rate meeting. He left rates unchanged at -0.1% and will continue to control the yield curve, aiming for 0.00% on 10-year JGB. In addition, the Bank of Japan noted that it does not need to change its management within 2-3 years, and will patiently pursue strong easing. Conclusion: The Bank of Japan is extremely accommodating and will continue to do its best to support the Japanese economy. HOWEVER, just a few hours after the meeting ended, the Bank of Japan surprised traders by intervening in the foreign exchange market! The Bank of Japan bought the yen across the board as it sent a message to traders that it would not allow the yen to depreciate further. USD/JPY fell from a high of 145.90 to a low of 140.35 before rising to 143.25 today. However, other yen pairs such as EUR/JPY, AUD/JPY, NZD/JPY and GBP/JPY continued to decline today in forex. (USD/JPY closed almost unchanged for the week). Will these movements continue throughout the week, or will traders take profits on short positions?

Bank of England

The Bank of England also rallied this week and decided to raise rates by 50 basis points (much to the chagrin of some traders who were hoping for a 75 basis point hike), raising the key rate to 2.25%. However, the vote was not unanimous as 3 members voted to raise the rate by 75 basis points. Remember that in the United Kingdom inflation is currently around 10%. However, the Bank of Japan cut its inflation forecast to just under 11% from over 13% (in October) due to the new administration’s guarantees on energy prices. The central bank also voted unanimously to reduce the amount of debt on UK government bonds. In addition, the Bank of England said that due to last week’s weekend, the UK may already be in recession. However, the Bank of England does not seem to agree with the FOMC as it is concerned about the impact of a recession, especially caused by the energy crisis. At the time, reaction to the pound sterling was muted.

british pound pounding

On Friday, the new Chancellor of the Exchequer, Kwasi Kwarteng, announced a new budget that includes tax savings and caps on electricity bills. However, investors are concerned about whether these plans will be fully funded. The Bank of England said it was raising rates and would start selling government bonds. If the budget is not fully funded, the government will have to issue new bonds at extremely high rates to cover the costs. The UK 10-year bond yield rose to its highest level since February 2011, approaching 3.84%, while the 2-year bond yield topped 4% for the first time since 2008. The lack of confidence in the new government led to the fact that the pound was defeated. GBP/USD fell nearly 400 pips to 1.0865 (lowest since 1985) and EUR/GBP rose 175 pips above 0.8900 (highest since January 2021). Will this movement of the British pound continue in Forex this week?

Business Results

Believe it or not, the third trimester ends this week. And that means that the season of income is just around the corner! However, there are still a few names this week as second-quarter earnings shrink. Some of the most profitable ones to be released this week are NKE, MU, BOO, NXT BBBY and BB.

Economic Data

Last week, the macroeconomic picture was focused on central banks. The data releases will be small this week, with the exception of the usual data at the end of the month. In particular, markets will focus on Friday’s inflation data, such as the EU CPI for September and the US PCE for August. In addition, the Central Bank of Mexico (Banxico) will meet on Thursday and China will release its manufacturing and non-manufacturing PMI NBS. Other important economic data to be released:

Sunday – September 25, 2022

Japan: PMI in Flash and Services (SEP)

Monday – September 26, 2022

Germany: Ifo Business Climate (SEP)
USA: Dallas Fed Manufacturing Index (SEP)

Tuesday – September 27, 2022

China: Industrial Profits (AUGUST)
US: Durable Goods Orders (AUG)
USA: S&P/Case-Shiller rate (July)
USA: New Home Sales (AUGUST)
USA: Richmond Fed Manufacturing Index (SEP)
Bank of Japan Monetary Policy Meeting Minutes
Australia: Pre-Retail Sales (AUG)

Wednesday – September 28, 2022

Germany: GfK Consumer Confidence Index (OCT)
US: Pending Home Sales (AUG)
Crude oil reserves
New Zealand: ANZ Business Confidence (SEP)

Thursday – September 29, 2022

EU: Economic Sentiment (SEP)
Germany: Provisional Consumer Price Index (SEP)
Canada: GDP before (AUGUST)
USA: final GDP growth rate (Q2)
Mexico: interest rate decision
New Zealand: ANZ Roy Morgan Consumer Confidence (SEP)
New Zealand: building permit (AUGUST)
Japan: unemployment rate (AUGUST)
Japan: Retail sales (AUGUST)
Japan: pre-industrial production (AUGUST)
China: NBS Manufacturing PMI (SEP)
China: Non-manufacturing PMI (SEP)

Friday – September 30, 2022

Japan: Consumer Confidence (SEP)
Japan: housing construction (AUGUST)
Germany: Retail sales (AUGUST)
UK: Final GDP Growth Rate (Q2)
Germany: change in the unemployment rate (SEP)
Bank of England: Consumer Credit (AUGUST)
EU: IPC Flash (SEP)
EU: Unemployment Rate (AUGUST)
USA: personal income (AUGUST)
USA: personal expenses (AUGUST)
USA: PCE Price Index (AUGUST)
US: Core PCE Price Index (AUGUST)
US: Chicago PMI (SEP)
USA: Michigan Consumer Sentiment Final (SEP)

See » Economic calendar

Forex chart of the week » Weekly change of major currency pairs

Source: StoneX

What a crazy week it has been for the financial markets, especially forex! Despite the intervention of the Bank of Japan, GBP/USD was in the lead with the widest weekly range of 567 points! The price opened the week at 1.1461 and closed the week near the lows at 1.0865! This is the lowest level since 1982! Behind this was the USD/JPY inspired by the Bank of Japan. The weekly range of the pair was 555 points, the closing price was 143.28, only 38 points higher than the opening price for the week! The FOMC meeting and subsequent rate hike helped the DXY dollar index trade in a 387-point range, closing near weekly highs near 113.00. The EUR/USD pair traded in a 382 pip range, exactly echoing the DXY, to close near weekly lows at 0.9695. The DXY index closed at its highest level since 2002, while the EUR/USD pair closed at its lowest level since 2002. USD/CAD traded in a 385 pips range, also closing close to its highest levels of 1.3588. NZD/USD and AUD/USD follow close to each other with ranges of 272 and 236 pips respectively.

Will the coming week be as unstable and chaotic as last week? Will the markets continue last week’s trend, or will there be some gains along the way? Quarter ends next week. Watch for activity at the end of the month, as well as activity at the end of the quarter as the end of the week approaches (for example, pension fund rebalancing). In addition, the EU CPI and the US core PCE are expected to cause volatility on Friday. Manage risk accordingly.

Good weekend!

Joe Perry, CMT, » Official site stock exchange FOMC

Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell any currency contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and accepts no liability for any direct, indirect or consequential damages that may result from anyone relying to such information.

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