September gave us a wonderful trading for the unexpected increase in the interest rate of the Bank of Canada. What kind of a trump card did October prepare for us? How will North Korea hold the anniversary of the founding of the Communist Party, will the tax reform project in the US go beyond the Republicans, what will the third quarter GDP indicators be for key players, and will the Bank of England give us another “surprise” this year. The tenth month of this year, perhaps, will be holding our attention constantly.
The Fed will raise. Trump will reduce.
Expectations for changes in the USA fiscal policy remain relevant, and Trump promises to implement the largest tax reform of recent decades, reducing taxes for Americans. The Republicans have already submitted their plan for reform.
On Tuesday evening, Janet Yellen said that despite the weak inflation the Fed should continue gradually raising the interest rate, as planned before.
Bullard (does not vote in the FOMC) is wary of low inflation and its sluggish prospects for growth.
Rosenberg (does not vote in the FOMC) supports a gradual and constant increase in the interest rate.
Evans wants to see a rise in inflation before another increase in the interest rate.
Dudley sees an increase in the interest rate along with weak inflation.
South Korea expects more provocations from the North Korea in October due to the Communist Party's founding date, and it looks like the dollar remains under the geopolitical influence, and we all need to continue to monitor the news flow.
Trump noted that the military option for resolving the North Korean issue is not preferable, but may prove to be “devastating”.
It seems that the CME Group futures are pretty serious about the next rate increase in December: the chance is 75%
The Bank of England raises
Mark Carney gives the go-ahead for raising the interest rate soon. The reason was positive dynamics of the British economy. And while we see positive data, economists make assumptions that the Bank of England will take actions in November.
The ECB is neutral
Coeure (ECB): does not be afraid of completing the incentive program (QE), but believes that it is necessary to leave it in gingerly manner.
Praet (ECB), economic recovery is not yet expressed in inflation.
RBNZ is not defined
The Reserve Bank of New Zealand left the interest rate unchanged, noting the uncertainty factor and the need for “a low level for the NZD, which will support the economy”.
The Bank of Canada decided to observe how it exacerbated market volatility
After two interest rate increases this year made by the Bank of Canada, Poloz, speaking on Wednesday, remained cautious enough and noted that the Bank's further behavior will be exactly such, as there is no pre-determined scenario for regulating the interest rate at this moment, and all the turns of the monetary policy will be clearly compared with real economic statistics.
It seems that we will continue sharply observing the indicators of inflation, which was also mentioned in the speech in the context of “uncertainty of prospects”.
All this allows increasing the trading expectations of the number of signals for Canadian indicators since the volatility sensitivity to them remains high.
What we are armed with for October 2017
The US Federal Reserve remains on its way - the way of the increase in the third interest rate in December, which means that the markets remain sensitive to US statistics, and especially to inflation, retail and labor market indicators.
The dollar will immediately expose its fangs on Friday during the publication of Non-Farm Payrolls. By the way, the ninth month has sunk into oblivion, and therefore wait for additional portions of quarterly reports (since the quarter is accordingly completed). Expect the first data of US GDP of the third quarter in the second half of the month.
Since Mark Carney has promised to raise the interest rate in the near future, we should not miss the reports of the British economy, which the Bank of England continues closely monitoring. In the second half of the month, there will be also the quarterly figures of GDP and the British economy.
Canada will become another active player in October, as the Bank of Canada has turned off the path of tightening monetary policy, is standing on the sidelines and is watching the consequences. Perhaps, the triggers for Canadian statistics will remain minimal for this time.
Australia will hold its meeting of the RBA, and Oceania as a whole will please us with additional quarterly inflation reports.
A full calendar of upcoming trading events that you can use for algorithmic trading can be found on the trading signals page.