Tough week for foreign exchange market: the Fed, the BoJ & BoE

17 jun 2019

Last week turned out to be not that difficult. For instance, the data on industrial production was better than expected, also the data on retail sales appeared better as well, but still not that good. The Michigan Consumer Sentiment Index (MCSI)came out below forecasts, but the difference was minimal, and the dollar strengthened fairly well in the foreign exchange market on Friday.

The dollar growth has been observed due to the Fed's possible future actions. This week the US CB is announcing the monetary policy decision. On the one hand, the weak data could convince the Fed to reduce the rate but on the other hand, Friday's data seems to have more influence in taking the decision.

The Bank of Russia lowered the rate on Friday. Due to the economic situation in RF as well as the current decline in oil prices, we continue to recommend sales of the Russian ruble.

The data on industrial production turned out to be lower than expected (5.0%, with a forecast of 5.4%). However, the weak data was offset by exceeding retail sales forecasts.

The companies are concerned with the consequences of the trade war. Therefore, more than 500 companies and industry trade associations wrote to the White House urging Trump to remove levies on China and end the ongoing trade war.

This week we are waiting for announcing the results of the FOMC meeting, BoJ and BoE decisions on monetary policy parameters, data on inflation statistics ( Eurozone, the UK, and Canada ) as well as data on retail sales from the UK and Canada.

Our trading preferences are unchanged: we will look for points for selling the US dollar primarily against the Japanese yen, as well as the euro, selling oil and the Russian ruble, as well as buying gold. We will look for points for buying GBPUSD with small stops.