One key event is going to determine short and medium term price action across a wide variety of tradable assets – particularly Euro/USD - the Federal Open Market Committee’s monthly monetary policy statement at 6pm GMT on Wednesday.
Wednesday’s FOMC statement is shaping up to be the month’s single most important event for traders of the euro-dollar, eclipsing even the positive Non-Farm Payrolls report on the 7th, and equally encouraging U.S. unemployment claims and retail sales data on the 13th, which together accounted for a 150 pip decline in the world’s most heavily-traded currency pair.
Why? Because recent economic data from the U.S. indicates that the Federal Reserve will announce another reduction to its quantitative easing program during Wednesday’s statement. And when the Federal Reserve does that, the euro-dollar plummets.
Let’s take a closer look at the U.S. data that has prompted Banc De Binary’s investment analysts to go out on a rare limb and predict not only a tapering of QE on Wednesday, but a precise scale-back of 10 billion dollars a month.
First of all unemployment. The Fed’s monetary policy makers have targeted an unemployment rate of 6.5% as a key marker for sustainable economic stability, and a vital precursor to reducing its quantitative easing program. While March data fell just shy of that magic number coming in at 6.7%, last week’s new unemployment claims were the lowest in three months, indicating a real improvement in the U.S. labor market.
Secondly consumer spending is on the rise. Last week’s shock retail sales figures showed a 0.3% uptick in U.S. consumer spending. Retail sales account for around 70% of U.S. GDP, and any improvement in this all-important metric indicates ground-level confidence in the U.S. economy both now and in the near future. It shows that people have money to spend, but more importantly it shows that they are choosing to spend it.
So. Wednesday the 19th of March at 6pm GMT. Banc De Binary investment analysts are predicting that the Fed will reduce QE to 55 billion dollars a month. If you trade the euro-dollar, you’d be mad to miss it.
Lauren Carmouche
Investment Analyst
Banc de Binary