Get ready to trade in currencies

Analysts suggest buckling your seat belts and getting ready for some big moves in the markets this week. Everything from equities, currencies to Treasuries and crypto have been itching for breakouts.

With five major central bank rate decisions, US retail sales, PMIs from Europe, job reports from the UK and Australia along with major option expiry this Friday, there are plenty of catalysts for big moves.

The most important event risks will be the Federal Reserve and European Central Bank monetary policy announcements but all of these events have market moving potential.

The top 10 events to watch this week are:

  1. Federal Reserve rate decision
  2. European Central Bank rate decision
  3. Bank of England rate decision
  4. US Retail Sales
  5. Eurozone PMIs
  6. UK PMIs
  7. UK CPI
  8. Australia Employment Report
  9. Canadian CPI
  10. New Zealand Q3 GDP

Following reports and events are also important but likely to illicit smaller market reactions:

  1. Bank of Japan rate decision
  2. Swiss National bank rate decision
  3. UK Retail Sales
  4. UK Employment Report
  5. German IFO

Typically currencies take their cue from the overall appetite for risk and USD but this week, the abundance of major reports from other countries means relative growth and monetary policy divergence could play a big role in currency direction.

Currency crosses in particular could see exaggerated moves. The Federal Reserve is widely expected to accelerate taper but the USD weakened against EUR and Swiss Franc during the NY session because this announcement is baked in.

Instead, USD traders took the cue from Treasury yields and stocks, both of which fell sharply on Monday. The prospect of less US stimulus and the first death from Omicron variant in UK sent equities tumbling lower.

In the next 48 hours, Omicron will become the dominant variant in the UK. GBP snapped a 2 day rally to end the day lower against the USD and EUR.

The common currency held steady ahead of the European Central Bank monetary policy announcement. Its resilience has more to do with USD weakness and short covering than optimism about the Eurozone economy.

Risk aversion hit the Australian, New Zealand and Canadian currencies the hardest. The most important release for Australia this week is the jobs report and economists are looking for the strongest job growth in 2 years.

Service sector activity accelerated in New Zealand and with the government moving ahead with easing restrictions, activity and sentiment should improve. Unfortunately, for AUD and NZD, risk off flows can easily overshadow data. CAD also sold off as oil prices trended lower.

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