There’s a huge end to this week as the UK and US prepare to make the Forex world volatile. The events to watch out for are “Super Thursday” and the NFP report, which is to be released on Friday. Expected the events to bring unexpected moves all over the dashboard.
The so-called “Super Thursday” brings a combo of important news from The BOE (Bank of England), as the interest rate is going to be released together with the now famous inflation letter. It should be mentioned here that, unlike the ECB (European Central Bank), the Bank of England does not hold a press conference unless it takes action on interest rates.
As they haven’t changed rates for some time now, the Inflation Letterpress conference is used instead. This better communicates to market participants, what the bank’s intentions are and helps with forward guiding the markets. I don’t know if that is an advantage or not, but what we do know is that the GBP (Great Britain Pound) is going to be highly volatile on Thursday.
While inflation is not really an issue in the UK and September even saw negative levels, the employment level is rising and this puts pressure on Carney, the Bank of England’s Governor, to be hawkish at the press conference.
If you add this week’s stellar performance by both PMI’s (manufacturing and services), then we may have a really hawkish outcome for the pound.
However, keep in mind that on Friday, the NFP (Non-Farm Payrolls) report is going to be released in the United States, and this report can be a game-changer for at least the following reasons:
1. It will make a stronger/weaker case, for a December´s rate hike in the United States as traders and investors are divided when it comes to the possibility for the Fed to deliver a rate hike this year.
2. If the BOE is going to be hawkish in their speech tomorrow, but the NFP report is disappointing the next day, then it is most likely that the Fed is not going to hike rates, and the BOE won’t hike either – it is unlikely for the BOE to act before the Fed.
Looking at the currency pairs, I really don’t like the USDJPY at the current levels. In fact, the further it rises above the 121 level, the more I want to short it. From my point of view, the current pace above 120 is a corrective phase, and the path of least resistance moving forward should be to the downside.
As for the GBP, the more attractive trade seems to be lower crosses such as a lower GBPCAD and EURGBP. However, I am not really convinced that this means weakness in the GBP. In any case, we’ll have an answer by Friday´s close.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
