Forex pairs welcomed a calm start of the week on the forex dance floor Monday morning during the Asian session but we have a busy week ahead on the economic calendar. Let’s see what happened over the weekend in Euro, UK, US and China, then move on to what we have on tap in the coming days, and most importantly, how you can make money off of it.
Little to no progress was made at last week’s Eurogroup meeting over the future of Greece. The best they could really come up with is an agreement to stay in steady communication and possibly extend the next deadline by a week, in the hope that this extra week will be different to all of the other extensions and there might be some progress.
A few analysts are saying that what Greece might actually need is for things to get worse so that they can get better. If the ECB pull their liquidity assistance and Athens is forced to implement capital controls, it might bring a realization that something has to give, this in turn could give Syriza a mandate to get a deal done with their creditors, even if the deal isn’t anywhere near as sweet as they were hoping for. Of course, the alternative to that outcome is that capital controls anger the people enough for them to vote out Syriza, or at least vote in more of the coalition who would take a harder line.
The UK Quarterly GDP Release is due on Tuesday at 9:30 AM GMT.
The previous U.K. GDP release indicated that the economy lost a bit of momentum in the last quarter of 2014 as the reading reflected 0.6% growth, slower than the previous period’s 0.7% expansion and Q2 2014’s 0.9% GDP figure. These contributed to a 2.6% annual GDP reading for the U.K. economy, its strongest year-over-year growth since the country’s pre-financial crisis days.
Despite that, Mr. British Pound still weakened against most of its forex dancing partners after the report was released, as the trading crowd speculated that the U.K. might not be able to sustain its pace of expansion. At that time, the downturn in inflation was also weighing on global economic growth prospects, also contributing to the pound’s decline.
For Q1 2015, the U.K. economy is expected to print yet another slowdown in growth, as the GDP reading is speculated to come in at 0.5%.
In the financial end, HSBC are reportedly looking to find a new home for their headquarters, as the UK is becoming too expensive for them to do business. The Bank paid the treasury three quarters of a billion pounds last year just through the ‘bank levy’ which could increase again after the election. HSBC’s plan could be to spin off its retail bank, for around £20bn, into something like the old Midland banking brand before moving its investment banking business to Hong Kong. Shareholders like the idea, with HSBC stock up around 5% at the close of business on Friday. Politicians would have to put a very brave face on if this happens on their watch, as it would hit jobs, taxes and send a message that Britain might not be as open to business as they say it is.
Mr. British Pound Forecast
As you’ve learned in the Invest Diva’s Forex Coffee Break Video Education Course Fundamental Beans, the country’s currency grows stronger when production and revenue (GDP) are high.
But you should always keep a close eye on other points of the Invest Diva Diamond Analysis to be able to conduct a 360 trading strategy.
So far Mr. British Pound is also performing well in global markets, pushing back up towards multi-week highs against Ms. US Dollar. Whether this is a calm before the post election storm, or a correction from over-selling in the first place remains to be seen, but will be answered by next Friday.
U.S. and A
From the US, we saw stock markets continue to push new highs last week, despite some less than impressive economic data. Unemployment reports and weaker PMI numbers have been shrugged off by the market, who continue to put their faith in stocks all the while the Federal Reserve procrastinate over rate rises. This week we get the FOMC meeting and interest rate decision, which is expected to be a unanimous ‘hold’. We also expect to see some mention of the poor economic performance in the first quarter and probably a little less optimism in their tone for the possibilities that the second quarter will bring.
Overnight during the Asian session we heard from China’s central bank, who have said that their monetary policy moves of late haven’t been meant as a hard stimulus package, insisting that they remain policy neutral. There has been some chatter of hard stimulus on the news wires following the market open, by where Beijing is looking at unconventional monetary policies, such as central bank buying of regional government debt. The Shanghai composite is currently up almost 40% year to date and if there is a stimulus package, we can only guess how much further it has to go.
Week Ahead on the Economic Calendar
Looking to this week the forex calendar shows that we’ve got a jampacked trading week with plenty of top-tier events coming up. On top of an FOMC meeting, we get to see GDP readings for the first quarter from the US and the UK.