April week 2, Looking Back and Looking Forward

Looking Back: Central Banks and Geopolitics Impact Forex Market

The second week of April saw several significant events impacting the forex market, including central bank meetings and geopolitical developments. The US Federal Reserve and the Bank of Canada released the minutes of their respective March meetings, signaling that both central banks may begin to taper their bond purchases later this year. Meanwhile, tensions between the US and Russia continued to escalate as President Biden imposed new sanctions on Russia. These events could have far-reaching implications for currency values in the coming weeks.

Upcoming Economic Events That Could Affect Forex Performance

Looking ahead to next week, several significant economic events are scheduled that could impact forex performance. On April 19th, the Reserve Bank of Australia will release the minutes of its April meeting, which could provide insights into the bank's outlook on the Australian economy and potential monetary policy changes. On April 22nd, the European Central Bank will hold its monetary policy meeting, where it is expected to keep interest rates unchanged. The market will closely monitor the ECB's press conference for any signals of future policy changes, particularly regarding the bank's bond-buying program. Additionally, on April 23rd, Japan will release its CPI data for March, which could impact the yen's performance.

Analysis of Major Currency Pairs: EUR/USD, USD/JPY, and XAU

The EUR/USD, USD/JPY, and XAU currency pairs were all affected by recent events. The euro has been trading within a range of 1.17 to 1.20 in recent weeks, with the ECB's commitment to a loose monetary policy and increased stimulus measures putting downward pressure on the euro. The upcoming ECB meeting on April 22nd will be closely monitored for any signals of future policy changes, particularly regarding the bank's bond-buying program. If the ECB hints at further stimulus measures, the euro could face additional selling pressure.

The USD/JPY pair has been trading between 108 and 110 in recent weeks, with the US dollar's recent strength driven by the Federal Reserve's optimistic outlook on the US economy, higher US Treasury yields, and the US government's massive stimulus package. The Bank of Japan's commitment to keeping interest rates low and maintaining its loose monetary policy stance has put downward pressure on the yen. Japan's CPI data for March could impact the yen's performance, with any sign of rising inflation potentially leading to a stronger yen.

Lastly, the XAU (gold) pair has been trading within a range of $1,680 to $1,750 in recent weeks. Gold's safe-haven appeal has diminished as investors have become more optimistic about the global economic recovery. Gold's recent lackluster performance has been attributed to several factors, including rising US Treasury yields, a stronger US dollar, and progress in COVID-19 vaccination efforts. The market will closely monitor any geopolitical developments or unexpected economic data that could impact gold's safe-haven appeal. If there are any signs of rising inflation or uncertainty in the global economy, gold could regain its safe-haven appeal and see a boost in value.

Trading Considerations for a Volatile Forex Market

In conclusion, traders and investors should closely monitor economic data, central bank statements, and geopolitical developments that could impact forex performance. The forex market is expected to remain active in the coming weeks, and traders should be prepared to capitalize on any opportunities that may arise. Proper risk management strategies should always be employed when trading in the forex market, and traders should remain vigilant to the potential impact of unexpected events on currency values.

The week ahead (calendar):

Monday 17^th April:

US: Empire State Manufacturing Survey,
Canada: Wholesale prices
EU: Reserve assets
UK: BOE Jon Cunliffe: Keynote speech at the Innovate Finance Global Summit
China: 1-year lending facility rate
New Zealand: Food and rental price indices, business PSI

Tuesday 18^th April:

US: New Residential Construction (Building Permits, Housing Starts, and Housing Completions), NAHB housing market index
Canada: Monthly CPI (core, median, trimmed)
EU: ZEW economic sentiment (EU, Germany)
UK: Earning and employment report
China: Q1 GDP, fixed asset investment, retail sales industrial output
Australia: RBA minutes

Wednesday 19^th April:

Canada: Producer prices, housing starts, house prices
EU: Inflation (CPI, core CPI, HICP), Construction output, balance of payments
UK: Inflation (CPI, core CPI, RPI, PPI)
Japan: Industrial production, capacity utilisation
Australia: Leading Index

Thursday 20^th April:

US: Initial Jobless Claims, Philadelphia Fed Manufacturing Survey, NAR Existing Home Sales, Weekly Economic Index,
EU: Trade balance, German producer prices,
China: 1 and 5-year loan prime rate
Japan: Trade balance, tertiary industry activity,
Australia: Judo Bank Flash Australia PMI’s
New Zealand: Quarterly CPI report

Friday 21^st April:

US: S&P Global Flash US Composite PMI, Existing home sales, FOMC voting member Lisa Cook speaks - Important Questions for Economic Research
Canada: Retail sales
EU: S&P Global Flash PMI’s (France, Germany, Eurozone), consumer confidence
UK: S&P Global Flash PMI’s, retail sales, GfK consumer confidence
Japan: CPI (March), Jibun Bank Flash Japan Composite PMI

References:

Federal Reserve, "Minutes of the Federal Open Market Committee, March 16-17, 2021"
Bank of Canada, "Bank of Canada leaves monetary policy unchanged, with continued extraordinary forward guidance and large-scale asset purchases"
BBC News, "Biden imposes new sanctions on Russia over election interference"
Reserve Bank of Australia, "Monetary Policy Meeting Minutes"
European Central Bank, "Monetary Policy Decisions"
Japan Statistics Bureau, "Consumer Price Index"