The week ahead has many a fundamental new release to look forward to, events which are sure to have traders licking their lips at the implied volatility and the numerous trading opportunities they create. Let us take a look at our top 3 picks:
1. The Reserve Bank of Australia (RBA) is due to release the Cash Rate and its monthly statement. The Cash Rate, which is the short term interest rate, is a paramount factor in currency valuation with a rise in rates resulting in the respective currencies appreciation while a decrease results in a devaluation of the currency. With the Cash rate expect to remain unchanged, we expect the Rate Statement, being among the primary tools the RBA uses to communicate with investors about monetary policy, to overshadow the release and have markets ready to pounce. Any hawkishness by the RBA, where they talk up economic growth and stability will see the Australian dollar appreciate across the board while a more dovish tone will see the Australian dollar depreciate across the board.
2. UK Services PMI is due on Wednesday, the figure represents a survey conducted on purchasing managers in the service industry with an aim of identifying the most current and relevant insight into the respective managers companies view of the economy. The figure is expected at 52.1, lower than last month’s 52.9 and due to the figure being regarded as a leading indicator of economic health, a better than expected release will see the GBP appreciate as the optimism filters through market, while worse than expected data will see the GBP depreciate as markets price in the dampening in confidence.
3. US Non-Farm Employment Change (NFP), arguably, the most important figure out of the US for the month, is expected to see a slight increase to 171k, from 151k. The Federal Reserve Bank (FED), who make the monetary policy decisions for the USA, watch this figure very closely as it is regarded as an early indicator of health in the jobs markets, with better than expected data implying that employment is improving and that an improvement in the overall economy can be expected as the new jobs see increases spending and confidence by individuals. Worse than expected data has the opposite effect, depreciating the USD as markets price in a drop in consumer spending and confidence.