The Week of Central Banks and U.S. NFP

Updated: Dec 23, 2019

It is just the beginning of year and February, yet economic rooster has been filled with events that make this week very exciting, in preparation of year to come. Federal Reserve held the US rates steady early on, maintaining a relatively neutral stance on interest rates hikes that has been quite a driver last year uplifting the scene from near-zero interest rates for years. And then yesterday it was the Bank of England interest rate day, when, it also held the interest rates steady however lifted Inflation and Growth forecasts for 2017 and 2018 (to account for normalization from current levels owning to BREXIT related changes). Both Dollar Index (.DXY) and the Pound showed identical behaviors: tanked from their respective post-election / January high numbers.

This stable stance by the Central Banks is an indication of tackling the economy in a steady grounded pace, its just start of year and we have 11 more months to go; this is not the time yet to see all fireworks. Markets are still adjusting to newer political scenes across the globe, US elections, Brexit referendum to name a few, given focus of the week. In addition re-balancing of Dollar index as well as low GBPUSD / Pound could be seen good for respective economies (better import - export possibilities given changing trade / trade partner landscapes - US trade restrictions - opting out of TPP deal, restriction of production of goods / manufacturing within the US for Automobile companies to name a few - and implementation of Britain's exit from EU leading to changing trading partnership deals). So far so good and positive. More volatility in markets gives better opportunities to traders.

The next key event of this week is the Non-Farm Payroll numbers, a much watched statistics for the US. Above figure displays last year's NFP numbers while the expectation for upcoming data is as follows:

As always possible scenarios of impact to various currency pairs can be laid out if and how the actual numbers differ from the expected. Commodities like Gold and Silver that are highly correlated to the USD too will offer volatility. Another key data offering volatility in the markets and there-by trading opportunities. Stay tuned!


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