The second week of the trading year looms as the FX market returns to normal. After weeks when liquidity was low, the trading environment is back to to normal.
The week ahead is full of events able to trigger abrupt market moves. Out of everything that lies ahead, here are the three risk events every FX trader should be aware of next week:
- Fed Chair Powell speaks
- US CPI report
- UK GDP
Fed Chair Powell delivers a speech in Sweden
From Tuesday, Federal Reserve Chair Jerome Powell’s speech will influence the price action in financial markets. He is due to participate in a panel discussion in Sweden, Europe.
The topic, in particular, is interesting: “Central bank independence and the mandate – evolving views”. In light of the last NFP report released last Friday, it will be interesting to see what the Fed Chair has to say regarding the federal funds rate, given the tight labor market and the inflation part of the Fed’s mandate.
US CPI report
Without a shadow of a doubt, the highlight of the trading week is the US inflation report. The inflation data refers to December, and the market expects the YoY inflation to cool down to 6.5% from 7.1% previously – a significant development given the Fed’s price stability mandate.
Details in the report do matter. As such, expect traders to scrutinize everything, from the monthly evolution of goods and services prices to the core CPI release.
US events are able to move the entire FX market, but some other, separate economic releases may move specific parts of it. This upcoming week is interesting for UK traders monitoring the British pound.
On Friday, January 13, the UK GDP data is scheduled for release. Investors expect the monthly data to show that the UK economy enters a recession. As such, the forecast is that the economy shrank in the last part of last year by -0.3% vs. 0.5% previously.
Any deviation from the market expectations should trigger sharp moves in the GBP pairs.
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