This week top stories about forex

This week is massive for forex trading. 

Four central banks are announcing rate policies that can alter their course and trajectory. All decisions should be clear that they are to raise interest rates. I personally do not think that we will have a different announcement than the expected rates. All forex traders should be very wary of any high volatility we might have this week. 

The Reserve Bank of Australia announced a rate hike from 1.35% to 1.85% today. 

The market has already priced in this decision, which led to a sell off shortly after the announcement. The RBA also stated that they expect core CPI at around 7.75% this year and hinted that this would not be the last rate hike. While the economy is expanding and employment appears to be strong, the RBA must assess the core CPI accurately or long-term growth may suffer.
 

Tomorrow (9/sept) we will have Bank of England monetary policy report hearing. 

Analyst and traders will be looking for a clue for next policy BOE will be taken on November. British Pound sterling is relatively strong if compared to euro from earlier this week. While GBP/USD had rejection when it reach similar level from early pandemic low. Will the new Prime Minister bring a positive influence is remain to be seen. 

 

The Bank of Canada will also announce its rate statement on the same day. The BOC is expected to raise rates from 2.50 bps to 3.50 bps.

 This will continue to put pressure on Canadian industry, as the country's largest importer, the United States, is attempting to reduce its demand. Canada's GDP increased in Q2 and the last unemployment data came out very strong. In my opinion, the BOC will follow the Feds' lead and raise rates aggressively in order to reduce prices and demand. However, as a net oil exporter, Canada should be very careful of how an aggressive interest rate could further hurt long-term growth. Canada Dollar is appreciated throughout pandemic era against EUR and GBP, if the oil prices starts to decrease we might see different trend form CAD. 

 

Next up, we have European Central Bank policy.

The Euro has been underperforming all year. War and inflation make matters worse. It is very clear that the ECB has to take action as soon as possible and maybe as rigorous as possible. EUR to USD is traded below the parity level. The ECB used to be known as a dovish central bank, but this week I doubt that this will happen. Whether this could increase the value of the euro remains to be seen. Medium term outlook so far isn't looking very well, particularly in industry sector which is one of the backbone of Eurozone economy. The bigger question for the markets is where the "terminal rate"—the point at which interest rates in the eurozone peak—is located.  The odds are currently around 1.75%, which is a lot lower than where the Bank of England's policy rate is anticipated to reach its high.  However make no mistake, the ECB will be sweating over the risks of raising interest rates in the midst of a recession just as much as the Bank of England will.