Whether you’re a scalper looking to take advantage of additional forex volatility or a swing trader riding on longer-term trends, y’all should pay close attention to this week’s central events. And if you’re a newbie trader, lemme remind you that interest rate expectations usually steer currencies in a particular direction so it helps to keep your eyes and ears peeled for any changes in monetary policy biases.
1. RBA monetary policy meeting minutes
On Tuesday 1:30 am GMT, the Reserve Bank of Australia will release the minutes of its meeting held a couple of weeks ago. At that time, policymakers decided to keep interest rates on hold at 2.00% while reiterating that monetary policy needs to remain accommodative and that further Aussie depreciation “seems both likely and necessary.”
If you’re wondering why it’s still important to take a look at the meeting minutes after central bank officials have already published their policy statement, keep in mind that the transcript of their discussions usually contains more details on the economic factors that supported their final decision. In addition, these minutes also sometimes give the inside scoop on which policymakers are starting to shift their stance.
In the RBA’s case, it would be interesting to see if some officials actually called for a rate cut but were outvoted by other policymakers. After all, RBA Governor Stevens acknowledged the negative impact of falling commodity prices on their trade numbers and highlighted some weak spots in their economy but stopped short of lowering interest rates. Any signs that RBA policymakers are willing to lower rates further this year could lead to a forex selloff for the Aussie while a more confident outlook could start a rally.
2. BOE monetary policy meeting minutes
It will be the BOE’s turn to release the monetary policy committee meeting minutes on Wednesday 8:30 am GMT. Note that their actual rate statement wasn’t accompanied with much fanfare since they didn’t really announce any policy changes and probably because forex junkies were holding out for more deets on the discussions.
In particular, pound traders are probably eager to see if any hawkish members voted to hike interest rates in July. You see, MPC members Ian McCafferty and Martin Weale (Let’s call ’em the Dissenting Duo) used to vote for a 0.25% increase in rates when the U.K. economy had been doing mighty fine back in the latter half of last year. A quick review of the latest set of reports shows that the U.K. has been churning out a lot of improvements so there’s a chance that this Dissenting Duo might don their hawkish feathers once more.
Aside from that, BOE Governor Carney himself seems ready to join the hawks’ camp since he mentioned that “the point at which interest rates may begin to rise is moving closer” in last week’s Inflation Report hearings. If his upbeat comments on strong wage growth and above-trend economic performance are echoed by several BOE committee members, the pound might be able to extend its forex gains.
3. RBNZ interest rate statement
Last but most definitely not least is the RBNZ interest rate decision on Wednesday 9:00 pm GMT. I know this comes a wee bit late for the U.S. session forex traders or way too early for some Asian session traders, but it could be worth burning the midnight oil or setting your alarm clock earlier!
Recall that the previous RBNZ statement sparked huge moves among the Kiwi pairs when the central bank decided to cut their benchmark rate from 3.50% to 3.25%, citing subdued inflation and lackluster growth as their main reasons for easing. At that time, RBNZ Governor Wheeler already hinted that “further easing may be appropriate” and that a lower exchange rate would be desirable.
Recent economic data from New Zealand suggests that central bank officials might maintain their dovish bias, as economic prospects have weakened. For one, the bi-weekly dairy trade auctions continued to reflect tumbling commodity prices while demand from its trading buddies China and Australia is expected to slow down. Of course the RBNZ might still decide to pause from its rate cuts since it just doled one out last month but the odds seem to favor another dovish announcement and more Kiwi depreciation.
There you have it, ladies and gents! As I always say, be mindful of fast and furious price action during these actual events and don’t forget to make the necessary risk adjustments for these market-movers. If additional volatility ain’t your cup of tea, there’s no shame in sitting on the sidelines! What’s your game plan for these catalysts?