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WEEK AHEAD: DECEMBER 14

Short Description

The Federal Reserve, Bank of England and the Bank of Japan all have their last monetary policy meetings of 2020 this week so I discuss the possible impact on forex markets and also rundown highlights from the economic calendar. Thanks! Rich

Video Script

Final BOE, BOJ, Fed meeting of 2020 -THE WEEK AHEAD (Dec 14-18, 2020)


Hi everyone, I’m previewing the week ahead and for the last time in this horrendous year of 2020, four major central banks, including the Fed, will make decisions on interest rates and all their other means of printing money. I will explore what the decisions could mean for currency markets while also noting when these meetings take place as part of this week’s economic calendar.

So I know us forex traders are obsessed with central banks and interest rates, but what’s amazing about 2020 is how thinking about what these bankers are doing has gone mainstream. The most obvious example is the ‘money printer go brrrr’ meme. I think this picture is the most famous- which has a logo of the Fed and a bank note going through a copier. But this video has also been viewed millions of times across different platforms, where Fed Chair Jerome Powell is just streaming out a bunch of notes from a printer on his podium. Brrrr is of course the sound of the printer.

If you think these memes are as funny and fascinating as I do, please click the like button -it really helps us spread the word about these videos!

As far as the economic calendar goes, we start off with retail sales and industrial production from China- which are a bit more interesting after the country flipped into deflation this month. Then we also have employment data from the UK and industrial production data from the US. On Wednesday there is a whole host of European PMI data culminating in the Eurozone composite reading for December. The rest of the week is dominated by central banks. In chronological order there is the Federal Reserve, the Swiss National Bank, the Bank of England and the Bank of Japan. Finally on Friday we have UK retail sales and German IFO data.

OK let’s run through each central bank meeting. Markets have been  expecting something from the Fed this time around and that has been reinforced by last week’s poor US jobs report, the late arrival of a new stimulus deal and the rising coronavirus cases in the US. I suspect they will just tinker around the edges in order to demonstrate a willingness to act. If the Fed makes no change, I think markets would be disappointed and we’d see a flow out of stocks and into the US dollar. If they do something- perhaps increase the duration of their asset purchases, it’s probably enough to encourage a Santa rally in stocks and more weakness in the dollar through the end of 2020.

We needn’t expect much from the SNB because their main policy tool for now is intervening directly in foreign exchange markets to limit strength in the Swissie. Same goes for the Bank of England but for different reasons. The BOE just added to its QE program and we have the final days of Brexit so they may want to keep their powder dry in case something unexpected happens there that requires intervention. Then lastly we have the Bank of Japan, which I think probably announces it will extend its stimulus and lending support program beyond the original deadline of March for perhaps 6 months. So when all’s said and done I think if any of these central banks will impact FX markets it will be the Fed- in part because the dollar has been so weak in the lead up. 

Right thanks everyone, good luck trading this week and make sure to subscribe to our channel so you don’t miss the next video.
 

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