Monday was a slow start to a busy week for the currency market. The US bond market was closed for Veteran's Day but the stock market was open allowing stocks to consolidate gains. After last week's big moves, the mood on trade turned sour again after President Trump said he hasn't made a decision on tariff rollbacks. Over the weekend, his contradictory comments continued as the President said talks were moving "very nicely" but the US would only make a deal with China if it were the right deal for the the US. Director of Trade Peter Navarro also said there will be no tariff rollback as part of the phase one trade deal. In a nutshell, last week's positive trade headlines created false optimism in the markets. At this stage, few investors should be surprised by this back and forth as trade developments remain one of the greatest risk for FX trade this week. 

Including trade, here are the 5 biggest risks for currencies:

  1. Fed Chairman Powell's semi-annual testimony to Congress on the economy & monetary policy (Wed)
  2. US President Trump speaks to economic club of NY (Tues) & Ongoing focus on trade
  3. Reserve Bank of New Zealand rate decision (Wed local time)
  4. Australia's Employment Report (Thursday local time)
  5. US Retail Sales (Friday) 

On top of all this, the market is on high alert for a decision on EU auto tariffs. The Europeans don't expect them to be imposed but when it comes to decisions by Trump, you never know.

Federal Reserve Chairman Powell's semi-annual testimony to Congress is one of the most important events this week but Powell won't be the only central banker speaking. We have scheduled events for nearly every US policymaker and many of them will be discussing monetary policy or the economy. Its no secret that after three rounds of easing this year, the Federal Reserve won't be delivering a follow up move in December. Powell also made it clear last month that the latest move was insurance, a message that we expect to be echoed by US policymakers throughout this week. We'll also hear from Bundesbank Governor Weidmann, RBNZ Governor Orr, BoC Governor Poloz, RBA Assistant Governor Bullock and Deputy Governor Debelle.

The best performing currencies today were sterling and the New Zealand dollars.   Despite weaker than expected UK GDP, trade and industrial production numbers, sterling popped after Nigel Farage said his Brexit party will not contest the seats won by the Tories at the last election. This is great news for Boris Johnson who now has a much greater chance of winning the December election. A victory is not guaranteed and there could still be a hung parliament but this announcement could completely overshadow softer data this week. With that said, the latest numbers reflect the negative impact of Brexit. GDP growth rose less than expected in the third quarter and slowed year over year. Industrial production continued to fall and the trade deficit widened more than expected. UK labor market numbers are scheduled for release tomorrow and the risk is to the downside after PMIs reported weaker job growth in manufacturing and services.

Economists are looking for the Reserve Bank of New Zealand to lower interest rates on Wednesday but the market is pricing in only 60% chance of easing. Either way, we believe that the New Zealand dollar should be trading lower ahead of the monetary policy announcement but currency traded sharply higher today after the shadow RBNZ recommended that the central bank keep rates steady. We believe that even if the RBNZ leaves rates unchanged, ongoing uncertainty in the region should keep them dovish and the risk for NZD is to the downside.

Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD extends losses toward 1.1250 amid coronavirus concerns

EUR/USD is trading closer to 1.1250 as concerns about US coronavirus cases are growing. Eurozone finance ministers are meeting ahead of next week's summit.  US PPI and updated COVID-19 statistics are awaited.


GBP/USD pressured under 1.26 amid risk-off mood, Brexit uncertainty

GBP/USD is trading below 1.26, off the highs. Rising US coronavirus cases are pushing markets lower and the safe-haven dollar higher. Concerns about Brexit and the UK refusal to participate in the EU coronavirus vaccine scheme are weighing on sterling. 


Gold: Well-defined battle lines point to range play around $1800

Gold nurses losses around the $1800 following Thursday’s good two-way businesses. The risk-off theme amid COVID-19 concerns continues to bode well for the US dollar. 

Gold News

Canada Net Change in Employment June Preview: June is looking better and better

Job gains expected to more than double in June. Unemployment rate to drop to 12% from 13.7 in May. Ivey PMI was twice its forecast in June, highest since Nov 2019. USD/CAD would benefit from better June job figures.

Read more

WTI extends Thursday’s drop as virus cases rise

Oil extends overnight sell-off as virus concerns dominate the market sentiment. The resurgence of virus cases in the US has fueled lockdown fears. The US on Thursday registered 65,551 new cases, a record for a 24-hour period.

Oil News

Forex Majors