Hang on! It’s the week we’ve all been waiting for!
Rest this weekend because the coming week in forex and financial markets will certainly be volatile! There will be more than a dozen central bank meetings where committee members will discuss interest rate policy as inflation rises. The most interesting meetings include the FOMC, CBRT, BOE, ECB and Banixco. Positioning and profit taking will dominate the first half of the week, while the second half will be driven by central bank activity. Moreover, the coronavirus does not appear to be going away any time soon and the UK has put ‘plan B’ into action. Additionally, although economic data will take a back seat to central bank meetings, there will be some important data this week including the number of UK applicants, US and UK retail sales. , a rollout of data from China and New Zealand’s third quarter GDP. The markets could be volatile, especially this weekend!
Wednesday is the FOMC meeting. Fed Chairman Powell recently “pulled” the word transitional during his testimony before the Senate and the Banking Committee, acknowledging that inflation is there to say it, at least for now. Will the Fed step up the pace of its bond purchases when they meet? At the last Fed meeting, they started shrinking at a rate of $ 15 billion in bonds per month. However, with Friday’s CPI printing for November at 6.8%, can they continue to decline at the current rate, or will they need to step up to try and bring inflation down. Growth and inflation forecasts will be released at this meeting.
Central Bank of the Republic of Turkey (CBRT)
On Thursday, first, the Central Bank of the Republic of Turkey (CBRT). We don’t usually pay much attention to CBRT meetings, but with the USD / TRY pair at record highs on forex and President Erdogan insisting that raising rates is the wrong way to cut inflation, this meeting will be fascinating. At the last meeting, the central bank cut the bank 100bps from 16% to 15%. With Erdogan apparently in charge, anything can happen. Note that as recently as September, rates were at 19%. The USD / TRY pair hit a new all-time forex high at 13.96017 on Friday.
Bank of England (BOE)
Then, on Thursday, the Bank of England (BOE). The UK’s £ 895 billion bond purchase program is set to expire at the end of December. Members of the Central Bank voted 6-3 to leave the program unchanged at its last meeting. With only a few weeks in the year, members are unlikely to vote to end it now. Even if voters have ended the program, it will only be a drop in the bucket as far as the reduction in quantitative easing. The next question is, when will the BOE start raising rates? With new guidelines in place in the UK for the coronavirus (more to come below), the BOE is expected to approve the rate hike at this meeting and wait until February 3.
European Central Bank (ECB)
The European Central Bank (ECB) makes its decision on interest rate policy 45 minutes after the BOE. Christine Lagarde beats the table on “temporary” inflation (formerly called transitory inflation). This is set to be one of the more intriguing meetings of the week, as cracks can appear for the ECB. Lagarde recently said the PEPP is expected to end as scheduled in late March 2022, but members of the central bank are not expected to make any long-term commitments on new programs. In addition, no less than two other members of the ECB spoke last week on the outlook for inflation. They raised the possibility that inflation might not return to the ECB’s 2% target as soon as initially thought. The preliminary inflation reading for November was 4.9%. With the growth and inflation forecasts expected at this meeting, new bond buying programs or adjustments to the Ongoing Asset Purchase Program (APP) were supposed to be discussed / implemented. How much will that change now that ECB members have seemed a little less accommodating? The increase in coronavirus cases across Europe will also be taken into account.
Bank of Mexico (Banxico)
The Bank of Mexico (Banxico) meets Thursday later today. At its last meeting, Banxico raised interest rates by 25 basis points, as at the three previous meetings, to 4.75%. The only problem is that these rate hikes have not been enough to slow the pace of inflation. It continues to increase at a rapid rate. Although central bankers have noted that they view inflation as transient (obviously they haven’t pulled that word out yet), headline inflation fell from 6.24% in October to 7.37%. % in November, moving further away from the central banks’ 3% target! A 25bp hike is expected at Thursday’s meeting. Is it possible that Banxico will increase its rates by 50 basis points?
Rightly so, many people are talking about the coronavirus again. The outbreak in the UK prompted Prime Minister Boris Johnson to announce a “plan B” to try to curb the spread of the Omicron virus. This includes people working from home, wearing masks in public places and using passes for vaccines. However, in the UK and other European countries the Delta variant is still the dominant variant. In some countries, the number of new cases has reached levels not seen since January! This spread is going to be a big factor for central banks when they meet this week. The emergence of the Omicron variant may cause central banks to be reluctant to further reduce bond purchases or increase interest rates. Watch to see if the number of new cases increases over the next few days.
With all of the central bank activity this coming week, it would be easy to dismiss some economic data that might otherwise sway a central bank decision one way or the other without inflation and the coronavirus. Employment data from the UK and Australia, a large rollout of data from China, the CPI in Canada, retail sales in the US and UK and preliminary data from the PMI are all on the menu for this week! The other economic data to be published are as follows:
Sunday – December 12, 2021
Japan: Tankan Index – Large companies in the manufacturing sector
Monday – December 13, 2021
New Zealand: Food Price Index (FPI) (Monthly) (Nov.)
Australia: NAB Business Confidence Index (Nov.)
Tuesday – December 14, 2021
United Kingdom: Change in the number of job seekers (NOV)
EU: Industrial production (OCT)
United States: PPI (NOV)
Australia: Westpac Consumer Confidence Index (DEC)
China: House Price Index (NOV)
China: industrial production (NOV)
China: Retail Sales (NOV)
China: Unemployment rate (NOV)
Wednesday – December 15, 2021
United Kingdom: inflation data
Canada : IPC (novembre)
Canada: Housing Starts (NOV)
United States: Retail Sales (NOV)
United States: NAHB Housing Market Index (DEC)
Canada: Speech by BoC Governor Macklem
United States: Fed decision on interest rates
Stocks of crude
Global: Industry and services PMI Flash (DEC)
New Zealand: GDP growth rate (Q3)
Australia: RBA governor’s inferior speech
Japan: Trade balance (NOV)
Australia: Consumer Inflation Expectations (DEC)
Australia: evolution of employment (NOV)
Thursday – December 16, 2021
Switzerland: Decision on interest rates
EU: Trade balance (OCT)
Turkey: CBRT decision on interest rates
United Kingdom: BOE decision on interest rates
EU: ECB decision on interest rates
United States: Building permit (NOV)
United States: Housing Starts (NOV)
United States: Philadelphia Fed Manufacturing Index (DEC)
United States: Industrial production (NOV)
United States: Manufacturing production (NOV)
Mexico: Decision on interest rates
New Zealand: ANZ Business Confidence (DEC)
Japan: BoJ decision on interest rates
Friday – December 17, 2021
Germany: PPI (NOV)
UK: Retail Sales (NOV)
Allemagne : Ifo Business Climate (DEC)
UE : IPC final (NOV)
See ” ECONOMIC CALENDAR
Chart of the week: Apple (AAPL) daily
AAPL stock hit new all-time highs 4 out of 5 days last week, including Friday’s high of 179.63. Apple’s stock has risen on the stock market since 2019, but the price began to aggressively rise in an orderly channel in the fourth quarter of September 2020, when the price was near 103.10. On December 1, the AAPL stock price widened above the channel’s upper trendline, closing lower the same day and moving back inside the channel. However, last Monday the price rose again above the channel near 164.29, and this time the price continued to climb and it did not look back. The first resistance level is the 261.8% Fibonacci extension from the September 8 high to October 4 low, near 188.00. Above it is the psychological resistance level of the round numbers at 200.00. However, note that the RSI is in overbought territory, an indication that the price may be ready to pull back. First support is Dec 1 high at 170.30 and then the upper long term channel trendline near 165.30. Below this is a confluence of support near 157.26 which is the September 8 high and an upward sloping channel dating from October 6.
This week could set the market direction for the first quarter of 2021. With many central banks set to meet this week to discuss monetary policy, an overall more hawkish tone could push stocks down, especially in the period of time. illiquidity at the end of the year. However, if there is a more conciliatory tone, perhaps on the back of ‘wait and see about the coronavirus’, stocks could continue to rise. Currencies should move on the forex based on the decision of each central bank for its own country.
By Joe Perry, Forex.com » Official site
Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or a solicitation to buy or sell forex foreign exchange contracts or CFDs. Although the information contained in this document has been taken from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages that may arise from the fact that someone relies on such information.