Monthly Forex News Events that Might Affect EURUSD Volatility – Dec 2017

Monthly Forex News Events that Might Affect EURUSD Volatility – Dec 2017

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Monthly Forex News Events that Might Affect EURUSD Volatility – Dec 2017

The EURUSD has continued to consolidate the gains achieved so far in 2017 and as we enter into the last month of this year we can expect more of the same from EURUSD price action. The Fed seems reluctant to provide any further evidence that they are ready to commit one more rate hike in 2017 and they still haven’t provided a clear timeline to reduce their balance sheet. On the other side of the monetary policy spectrum, we have the ECB which has signaled that it might start unwinding their balance sheet, as well as the inflation expectation, are very close to the ECB target.


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In essence, the EURUSD s driven by both central banks: the Fed and the ECB. For the time being the ECB is expected to keep the 2.3 trillion assets purchasing program, but the market move in anticipation of monetary policy decisions which is why the EURUSD has continued to rally throughout this year. The market focus is now shifting to a new month – December which can provide us with plenty of fundamental drivers that can impact the market volatility and the EURUSD exchange rate.

The month of December is set to be a very active month if the current level of volatility will persist. The December seasonal pattern sees the US dollar falling even further so we don’t have reason to expect the current rally to end anytime soon unless a full-scale risk aversion kicks in, which will be bearish for EUR/USD exchange rate. The seasonal pattern only gives us the tendency of a particular currency to exhibit a certain behavior at a certain time, so we have to carefully monitor the pattern and how the fundamental forces interact with the price action. Going forward, we’re going to analyze and disseminate the major news event for the upcoming month that can be the catalyst for higher EURUSD volatility.

“Don’t risk significant money in front of key reports, since that is gambling not trading.”
– Paul Tudor Jones

Monthly Forex News Events that Might Affect EURUSD Volatility – Dec  2017

 

We have to keep in mind that December can also be a very slow month in terms of trading activity because we enter the holiday season.

Firstly, we have the Fed interest rate decision which probably is set to hike rates by 0.25% despite growing concerns over the persistence weakness in inflation. Secondly, we have the ECB, which can give us some hints on its monetary policy and the QE tapering process. With inflation picking up and the EURUSD exchange rate moving higher there are high chances the ECB president Mario Draghi to give hints in regard to the start of the tapering process.

  • Tuesday, December 5, 2017 – The EU GDP figures for the third quarter are expected to be released. This is the GDP revised figures and we already saw the EU economy expanding by 0.6% versus the o.4% expected in the Q3. The annualized EU GDP rate stands at 2.5%.
  • Friday, September 1, 2017 – First Friday of the new month will bring the NFP job report, which can be the catalyst for some trend development. The market consensus is again for a figure above the 200k mark after we saw a healthy 261k in October. The unemployment rate is also at 4.1%, a level not seen in the last 17 years.
  • Tuesday, December 12, 2017 – The US PPI figures are the highlight of the day. The PPI is Fed’s favorite way to measure the inflation and since inflation is so important for the monetary policy, it should be a risk event worth to keep an eye on. The annualized PPI inflation rate stands at 2.8%.
  • Wednesday, December 13, 2017 – The Fed interest rate is now the most awaited rate decision in awhile. According to latest FOMC minutes some Fed officials seems concerned with the low level of inflation but according to some Wall Street analysts this won’t stop the Fed from hiking rates one more time this year from 1.25% to 1.5%.
  • Thursday, December 14, 2017 – The European Council meeting will bring together the EU leaders. This meeting is important because among other topics the EU economic state of affairs will be on the agenda as well as the Brexit talks.
  • Thursday, December 14, 2017 – The ECB interest rate decision and monetary policy announcement is the last chance Mario Draghi has to signal the prospects of a possible tightening cycle.
  • Friday, December 15, 2017 – The US government shutdown limits is the main risk event of the day. The US congress needs to vote to raise the debt limit and since the Republican Party already has a comfortable majority the shutdown can be avoided.
  • Thursday, December 21, 2017 – The US final GDP figures for the third quarter are scheduled to be released. The US economy grew by 3% for a second quarter in a row and according the general consensus the final GDP figures shouldn’t suffer any changes.
  • Monday, December 25, 2017 – Is the Christmas day and the starting day of the holiday season which means that the market will be dominated by low liquidity and low trading activity.
  • Wednesday, November 22 – The FOMC minutes will give us further clues into the Fed’s monetary policy.
  • Wednesday, November 29, 2017 – The US GDP figures for the 2017 3rd quarter are scheduled to be released. The US economy is expected to grow by 2.4% which weaker than the Q2 reading of 3.1% increase.

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