InstaForex

November 1, 2021

The Week Ahead in FX (Nov. 1 – 5): 2 Hawkish Central Banks and an NFP Release

 We’ve got a busy trading week ahead with the RBA, BOE, and the Fed all publishing their monetary policy statements.


And if that’s not enough action for you, traders will also be all over the U.S. NFP numbers on Friday.


Ready to make trading plans for the next few days? Don’t forget to review which factors drove forex market price action last week, too!


Major Economic Events:

RBA’s policy statement (Nov. 2, 3:30 am GMT) – As expected, the Reserve Bank of Australia (RBA) kept its policies unchanged in October.


Analysts aren’t expecting changes from the central bank this time around either, but traders will tune in on Governor Lowe’s presser to see if RBA is still interested in defending its 0.1% yield “target” on its three-year debt. If you recall, RBA did not step up to buy bonds even when yields hit more than 0.5% last week.


Lack of conviction in defending RBA’s super cheap yields would mean that the central bank is getting comfortable with higher interest rates and possibly lead to RBA raising its rates sooner than 2024.




FOMC’s monetary policy statement (Nov. 3, 6:00 pm GMT) – “Substantial further progress” on the Fed’s inflation and employment mandates have everyone and their momma expecting the Fed to scale down their monthly asset purchases from $120B per month starting in November.

With asset purchases likely zeroing out in June 2022, markets will have their eyes on an interest rate hike schedule.


Hawkish statements from Fed members can extend the dollar’s rally across the board. Surprisingly dovish statements or a slower-than-expected tapering pace, on the other hand, could knock the Greenback down against currencies with more hawkish central banks.


BOE’s monetary policy statement (Nov. 4, 12:00 pm GMT) – Bank of England (BOE) members have been hinting of the urgency to respond to high inflation and now markets are pricing in at least a 15-basis point interest rate hike from the central bank.


Don’t expect too much hawkishness though! Aside from the rate hike likely not being unanimous, we might also see other Monetary Policy Committee (MPC) members push back and call for more economic data before committing to an interest rate hike schedule.


U.S. NFP reports (Nov. 5, 12:30 pm GMT) – Increased labor demand and the expiration of jobless benefits are expected to boost non-farm payrolls (NFP) by about 400K after a disappointing 194K increase in September.


The report will be printed after the Fed’s taper timeline has been announced so its impact may be muted. However, traders will still look at data points like labor participation rate and average earnings for clues on hiring and inflation trends.


Forex Setup of the Week: GBP/USD

Risk-taking and BOE members hinting at their urgency to respond to high inflation have helped push GBP/USD at least 400 pips higher from its September lows.



Cable has encountered resistance at 1.3850, however, and now it’s trading inside a descending channel that has a bearish moving average crossover on its side. The bearish divergence on the daily time frame doesn’t help pound bulls either.

This week’s Fed and BOE policy announcements could shake GBP/USD’s price action up. Lack of further interest rate hike commitment from BOE members or a hawkish Fed taper and interest rate timeline could drag GBP/USD back to its September lows.


On the other hand, hawkish surprises from the BOE, a surprisingly less hawkish timeline from the Fed, or a round of profit-taking could propel GBP/USD above its descending channel candlestick pattern and push the pair to its 2021 highs near 1.4150.