Autumn is upon us, and the markets are heating up. The world’s central bankers have abundant food for thought following last week’s epic US CPI print. How will the money men handle the pressure? With the Fed, BoE, and SNB in action, we’re soon to find out.
The coming five sessions are all about the bankers. Sprinkle in Tuesday’s EU CPI release, and we’re in for a wild ride ahead of Friday’s bell. Any time things are poised to get crazy, it’s best to simplify our trading approach. Let’s look at three potential movers and shakers — the EUR/CAD, NASDAQ 100, and the GBP/CHF.
Tuesday
EU CPI (August) is due out during Tuesday’s London session. The big figure we are looking at here is CPI year-over-year. July’s figure reached 5.3%; will August show a marked decline? The ECB sure hopes so — more rate hikes aren’t what Lagarde and company want going into Q4.
Thus far in September, crude oil has been on fire. For that reason, the Canadian dollar is our target dancing partner for the euro.
Key Market: EUR/CAD
Wednesday
Mid-week and mid-month trade will be all about the US Federal Reserve. Wednesday is the big day — will it be another ¼ point rate hike or hold the line? Following the US CPI release, the CME Fedwatch priced a 91% chance of no hike. If we see rates held at 5.25%-5.5%, stocks could push higher.
The NASDAQ 100 will come alive Wednesday; new all-time highs by the end of Q3? Anything is possible…
Key Market: NASDAQ 100
Thursday
Is anyone up for more central bank action? The Swiss National Bank (SNB) and Bank of England (BoE) are due out with their rate decisions. Inflation continues to run rampant in the UK, prompting many traders to price another ¼ point rate hike to 5.5%. The real question is what the SNB is planning. Is it north to 2.0%, or stand pat at 1.75%? The SNB is a real wild card — we’ll be looking to profit on the franc pairs as the action unfolds.
Key Market: GBP/CHF
Bottom Line
Former Vice Chair of the Fed Alice Rivlin summed up the role of central bankers succinctly: “The job of the Central Bank is to worry.” This week, it’s a balancing act as the world’s monetary hierarchy walks the tightrope between balancing inflation and promoting maximum employment. Inflation remains the number one threat to global economic stability — will the bankers stay aggressive or exercise patience? Either way, we’ll be looking to cash in.
Alright, it’s quiz time. Who was the Chairman of the United States Federal Reserve on Black Monday, 1987? Was it Ben Bernanke, Janet Yellen, Paul Volcker, or Alan Greenspan?
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That’s it from here! Trade well, and we’ll see you in the markets!
