Friday November 17, 2017 - 17:29:10 GMT
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Market Seasonality and The British Pound Remains in the Spotlight
John M. Bland, MBA, co-founder, global-View.com
Seasonality In Forex Activity Forex trading has always been marked by strong seasonality. Following the arrival of the robots, some of the seasonality has been diminished. Nevertheless, end of month and end of quarter trading still have their special characteristics. The end of the calendar year, which is characterized by end of year for many financial statements and a number of global holidays tends to see institutions, such as central banks, trying to get decisions out of the way so that their profile is reduced in the final half of December and into the early days of January. On this score, the FOMC is seen as a lock to raise its Fed Funds target range to 1.25-1.50% at its December 13 meeting.
On December 14, the ECB is expected to tidy up some year-end loose ends as well. It is widely expected that they will confirm a reduction to EUR 30bn for monthly net bond purchases until the end of September 2018. Thereafter, interest rate could start rising in mid-2019.
Strong Focus on GBP Crosses Persists One need only look at a chart of GBPUSD over the past year to see a steady improvement in the pair as Brexit moves in fit and starts closer to becoming a reality. On the other hand, the EURGBP pair has been trading in a range over the period. The mid-week period of each month typically sees a heavy flow of U.K. data. Those of us who focus intently on the EURUSD pair dismiss these U.K data releases at their peril. The GBP and USD tend to react strongly to domestic data, while for some reason the EUR does not.
We notice that buyers or sellers of the EUR do so not only vs. the USD, but also vs. the GBP. The same goes for buyers or sellers of the GBP. Those trades are often done vs. the USD or EUR. To lesser extent, so-called cross trading is also done against the JPY. So if you are attempting to monitor forex activity, you may miss a lot if you are not watching relative values of the EUR, GBP, JPY, and USD. I do not recommend the dollar index. If you look at its weightings, you will find it is primarily a EUR index.
Recent U.K. data have generally had a positive economic bias. The talk around the latest Bank of England rate hike was that it was to be a case of “one and done”, but market chatter now sees increasing numbers of forecasts for rate hikes into the mid-2018 period from the current 0.75% to 1.00 or 1.25%. The one major fly in the ointment is the uncertainty surrounding the future of Prime Minister within her own political future. <br
Amazing Trader EVENT RISK Calendar:
Mon 20 Nov
15:00 US- Leading Indicators
Tue 21 Nov
15:00 US- Existing Homes Sales
Wed 22 Nov
13:30 US- Weekly Jobless
13:30 US- Durable Goods
15:00 US- final University of Michigan Survey
15:30 US- EIA Crude
19:00 US- FOMC Minutes
Thu 23 Nov
US/JP- Holiday
All Day flash PMIs
13:30 CA- Retail Sales
Fri 24 Nov
All Day flash PMIs
09:00 DE- IFO Survey
US- Early Closes
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
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