Unlike the previous trading week which was filled to the brim with top-tier economic catalysts, the upcoming one looks relatively light.
Does this mean that the focus would stay on global banking liquidity woes?
Or will the fresh round of inflation-related figures steal the show?
Before all that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!
And now for the closely-watched potential market movers this week:
Major Economic Events:
Here’s what’s on the economic calendar this week:
German Ifo business climate index (Mar. 27, 8:00 am GMT) – First up is a quick look at business sentiment in the eurozone’s largest economy.
Coming off the downbeat ZEW economic sentiment figures for the same month, we might see a sharp dip in confidence for March owing to the recent bank runs and fears of a financial sector collapse.
BOE Governor Bailey’s speeches (Mar. 27, 5:00 pm GMT and Mar. 28, 8:45 am GMT) – Although the U.K. central bank hiked interest rates by 0.25% as expected in their latest statement, it’s important to note that head honcho Bailey isn’t feeling too hawkish at the moment.
Recall that he warned that the latest CPI upside surprise might be a one-off since they expect price pressures to keep tumbling for the rest of the year. Still, reassuring remarks on the U.K. banking industry might be enough to keep pound pairs afloat for the time being.
Eurozone preliminary CPI readings (starting Mar. 30) – We’ll have an early glimpse into the latest inflation figures from the region, as Germany and Spain will be releasing their preliminary CPI readings on Tuesday.Later in the week, the region will print its flash headline and core CPI, likely giving some insight on whether or not the ECB can carry on with its tightening cycle.
Don’t forget that Chairperson Lagarde clarified that policy tools needed to maintain price stability (a.k.a. interest rate hikes) are separate from those required to ensure financial stability.
Chinese official PMI surveys (Mar. 31, 1:30 am GMT) – China will be printing its latest round of manufacturing and services PMIs for March, likely impacting overall market sentiment on signs of an economic rebound.
U.S. core PCE price index (Mar. 31, 12:30 pm GMT) – Before the week comes to a close, Uncle Sam will release the Fed’s preferred inflation measure, which would still probably influence Fed tightening expectations.
Forex Setup of the Week: USD/JPY
The lineup of bearish signals on the daily chart of USD/JPY is looking pretty ominous, especially since the pair seems to be gearing up for another selloff confirmation.Not only did the 100 SMA and 200 SMA complete a bearish moving average crossover a few days back, but price is also completing a head and shoulders formation.
Now USD/JPY is known for its adherence to technical setups, so a break below the neckline around the 128.50 minor psychological mark might be enough to set off a long-term downtrend.
If that happens, the forex pair could tumble by over 2,200 pips or the same height as the chart pattern.
Just be careful since Stochastic is already indicating oversold conditions or exhaustion among sellers, so a bit of hesitation or consolidation might be seen before any big moves are made.
The FOMC already noted that tighter credit conditions are in the cards, so make sure you keep tabs on U.S. banking sector updates and efforts to shore up liquidity and investor confidence!