More central bank intervention to come?
Forex traders will be eagerly awaiting the week ahead to see which central bank might be next in line.
For the past few weeks, the Bank of Japan has been intervening on the exchange rate and the yen bill, as it failed to drive down the price of the yen pairs. Last week, the Bank of England took part in a gilt-walking round, earmarking £65m for gilt age with a longer stay just after October 14. This week, the RBA and RBNZ met to discuss interest tax policy. With last week’s interventions, will either central bank be first in the pivot and decision maker in the augmentor for all? In addition, OPEC+ met once a week to decide what would be fair in the appropriation of crude oil. Will they reduce supply after last year’s aggressive increases? Additionally, this week’s nonfarm payrolls data confirmed the Fed’s bullish views, or could a bad number happen to pause their rate hike cycle?
Central bank intervention
The Bank of Japan intervenes in the foreign exchange market and the price of the yen fell. The USD/JPY pair is trading at 145.90 before the BOJ trades the market and hits between $21-25 billion yen. This sent the price of USD/JPY lower to an intraday low of 140.35. However, the pair quickly stalled the move and is currently trading just below the 145.00 area, along with the fearful expecting the BOJ to enter the new price range.
Last week, the Bank of England intervened in the mandatory market and pledged to buy £65m worth of 20-year plus bonds to push yields down at the long end of the curve. This was after Prime Minister Liz Truss attempted economic suicide with a tax cut “mini-budget”. Gilt markets nearly crashed, but the BOE was there to save the day. At the last BOE meeting, the MPC said the start of the sale is a portfolio of government bonds worth £80bn a year. This has been pushed back to October 31. Traders demanded now that the central bank could intervene next.
The People’s Bank of China (PBoC) has warned its state-owned banks that it could step in and save the yuan, but China is on vacation for the week and is likely to step in during the march festival. The Bank of Japan could very well intervene again if it sees it continue to fall. The RBA and RBNZ met last week. Maybe they won’t necessarily kick in, but either could “pivot” and slow the pace of interest rate hikes. Traders should remain vigilant and manage risk accordingly next week.
Reserve Bank of Australia
The RBA and RBNZ met weekly to discuss tax policy. I found out how much I know if the RBA will hike rates by 25bps or 50bps, after 3 consecutive 50bps rate hikes. At its last meeting, the RBA signaled that it plans to raise the interest rate in the coming months, but is not on a pre-determined path. Global inflation has been elevated and Australian employment and manufacturing data has been strong. Additionally, the Aussie dollar is distressed and AUD/USD is near its post-pandemic low. That should set the stage for a 50 basis point higher to take the cash rate to 2.85%. However, on September 16, RBA Governor Lowe said that a moment had passed, the RBA had kissed itself up 50 basis points, and it had moved closer to that point. . As a result, the RBA could be tilted to only increase by 25 basis points.
Reserve Bank of New Zealand
At its last meeting in August, the Reserve Bank of New Zealand (RBNZ) statements are steering down 50 basis points to bring the steering fee down to 3.0%. It was the fourth consecutive 50 basis point rate hike. The RBNZ also said it should raise rates going forward, peaking at 4.1% in March 2023, to bring inflation back to its target. Last week, RBNZ Governor Orr said that although the rate hike cycle is well advanced, further tightening is likely needed. Please note that there is another 50 basis point increase due to the weekly meeting that the NZD/USD pair is approaching due to the pandemic in the forex market. This would bring the cash rate to 3.5%.
OPEC and its partners met weekly to decide what would be fair in the appropriation of oil. the crude WTI to this extremely volatile market, dropping from $123 in June to $76.50 per week. Sources disagree that to curb oil price volatility, OPEC+ will cut production by 500,000 to 1,000,000 bpg. Note that the royal production of common names is left in less than six quotas, so a small reduction in production should be negligible compared to the overall price. Brent Crude Oil is currently trading at a rate of $86.00.
The start of the three quarters contributed with a new round of earnings reports. However, it is still too early in the quarter to bring in the big names. This launched the next weekly with bank revenues. This week we hear such names at Tilray, Tesco and Wetherspoons.
Start of the month means start of the month data, with the most anticipated event being the US nonfarm payrolls data to be released on Friday. Due to the fact that the US economy added 250,000 jobs in September, it just added 308,000 jobs in August. The Fed will be very pleased if the children are happy with their care, but it will be more confident of the rate hike lords. Additional giveaways for this week include the latest global PMI giveaways and Monday US ISM PMI giveaways and Canada employment developments. Other significant economic donations that were released this week include:
Sunday – October 2, 2022
World: Global Manufacturing PMI (SEP) Finals
Japan: Tankan Index of Large Manufacturers (Q3)
Japan: summary of BOJ opinions
Monday – October 3, 2022
UK: National Housing Prices (SEP)
United States: ISM constructor PMI (SEP)
United States: Departments of Construction (AUG)
New Zealand: NZIER Business Confidence (Q3)
Japan: Tokyo CPI (SEP)
Australia: Building permit (AUGUST)
Australia: RBA decision on interest rate
Tuesday – October 4, 2022
EU: PPI (AUG)
US: Factory Orders (AUG)
World: PMI Services (SEP) World Final
Australia: Retail Sales Final (AUG)
Australia: RBA Map Pack
New Zealand: RBNZ Interest Rate Decision
Wednesday – October 5, 2022
Germany: Trade balance: (AUG)
United States: ADP Employment Change (SEP)
Canada: Trade Balance (AUG)
United States: Trade Balance (AUG)
United States: ISM PMI non-manufacturing (SEP)
Australia: trade balance (AUGUST)
Thursday – October 6, 2022
Germany: factory orders (AUG)
EU: Global Construction PMI (SEP)
EU: Retail sales (AUGUST)
Canada: Ivey PMI sa (SEP)
Japan: Household spending (AUGUST)
Australia: RBA Financial Stability Report
Friday – October 7, 2022
Germany: Industrial production (AUGUST)
UK: Halifax Logs Price Index (SEP)
Mexico: CPI (SEP)
Canada: Evolution of Employment (SEP)
United States: NFP Nonfarm Payroll (SEP)
See » Economic Calendar
Forex Chart of the Week » GBP/USD 4 Hours
The GBP/USD pair has been volatile for the past few weeks in forex, to say the least. On September 13, the pair was trading near 1.1700. Less than two weeks later, GBP/USD hit a low of 1.0357, the lowest ever traded between the free British Pound and the US Dollar! The previous low was 1.0520, created in 1985. Since then. GBP/USD price rebounded to the 61.8% Fibonacci retracement level from the September 13 highs to the September 26 lows near 1.1235. At the level there is also horizontal resistance and the bottom of a descending channel which is currently available at Below, dating from May. If the pair continues higher from here, horizontal resistance is at 1.1383 rather than 1.1590. Above, the price can reach the September 13th highs at 1.1738. However, if current resistance holds and price action is lower, first support is still more than sold at 1.1035. Below, GBP/USD may fall to horizontal support at 1.0931, after the previous all-time low at 1.0520.
Markets will be eagerly awaiting this week to see which central bank might be next. In attendance, they will see the RBA and RBNZ make their respective decisions on rate hikes. in addition. OPEC+ will hold its monthly meeting to decide on production equity and the United States to publish the Masse Salaire Non Agricole (PNF) for September. Sit tight…it could be another passionate week!
By Joe Perry, CMT, FOREX.com » Official Site
Disclaimer: The information and opinions contained in the report are provided for general information only and do not constitute an offer or a solicitation concerning the sale or sale of foreign exchange contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy and is not exhaustive, and assumes no liability for direct, indirect or consequential damages resulting from than anyone he trusts such information.