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Last week was definitely hot in terms on high risk events as on one hand we had the ECB monetary policy and on the other hand we had NFP figures which saw 3 straight monthly increases in the labor market, and S&P500 hitting a new all time high. The fact that ECB has not acted on the deflationary pressures is becoming an increasingly bigger threat to EU zone this puts a higher risk on the upcoming inflation figures from different countries withing EU zone that are about to be released next week:
- France, Europe's second-largest economy. CPI YoY: Expectation=0.8%; Previous=1.1%;
- Greece's CPI YOY: Expectation=-; Previous=-1.1%;
- Portugal's CPI YOY: Expectation=-; Previous=-0.1%;
- Germany, Europe's biggest economy, CPI YoY: Expectation=1%; Previous=1.2%;
- Spain's CPI YoY: Expectation=-0.2%; Previous=0.0%;
As you can tell the deflationary pressures are still there and this may force ECB to engage in some more easing, that's why this numbers has become very important. There are 2 possible scenarios: market participants will "front run" ECB and try to discount the fact that at some point in the future they will do some aggressive easing to tame down deflation, thus sending EUR/USD down or secondly they will fade this inflation figures and send EUR/USD higher and this should force Draghi's hand to act even more.
- Japan's economic data
Tuesday we have the interest rate decision which is expect to stay at this historic low level for quite some time, and also we have the BOJ Monetary Policy Statement which is a high risk event. The market now expects that BOJ is not going to upgrade his stimulus program, however the Economy Minister in Japan has said that the best way BOJ can be effective is to surprise the markets but this is still a very low probability for that to happen this week.
Other major events are the Wednesday's FOMC minutes and also the Aussie's Unemployment Rate: Expectation= 6.1%; Previous=6.0%; which can put some pressure on AUD/USD.
Best Regards,
Daytrader21
