Monthly Forex News Events that Might Affect EURUSD Volatility – May 2018

Monthly Forex News Events that Might Affect EURUSD Volatility – May 2018

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Monthly Forex News Events that Might Affect EURUSD Volatility – May 2018

Since the beginning of the year he EURUSD has been consolidating between support level 1.2150 and resistance level 1.2550. There are no major catalysts to drive and promote clear trends as current monetary policy drivers have been discounted by the market. In order for real trend development to emerge, we really need a strong fundamental catalyst to change the direction of the trend.  The EURUSD trading range can be explained by the fact that both the Fed and the ECB are very predictable with their monetary policy decisions and real trends only come out when we have market uncertainty.


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With the inflation inching higher, we can see the Fed being more aggressive in normalizing interest rates. Actually, the fed funds futures are already starting to price in one additional rate hike, which means the Fed is going to hike rates four times in 2018. The benchmark interest rate has gone up to 1.75% versus 1.5% previous reading. The ECB also seems reluctant to move away from its ultra –easy monetary policy anytime soon. The market can become complacent of not knowing the exact timing of unwinding the QE program which can be negative for the EURUSD exchange rate.

April was again a very slow trading month as we’ve consolidated the previous gains and moved in a wide trading range. Moving forward the seasonal pattern in May is extremely bearish but we should look for a low to be formed in mid-May. 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 – May 2018

 

Moving forward, into a new trading month we can highlight what are the main risk events that can disrupt the market volatility and which can potentially set in motion new trends.

Now, let’s move forward and see what the biggest risk events in May2018 are:

  • Tuesday, Monday, May 1, 2018 –The Labour Day holiday is celebrated through entire Europe, which means that we’re going to have a very low trading activity as banks are mostly close and not open for business.
  • Wednesday, May 2, 2018 – The EU GDP figures for the first quarter of 2018 are scheduled to be released. The US-based ratings agency, Standard & Poor is seeing the Eurozone economy slowing down from 2.7% growth in the last quarter of 2017 to 2.3% in the first quarter of 2018.
  • Wednesday, May 3, 2018 – The US Fed is expected to deliver its interest rate decision. While the market consensus is for the Fed to raise interest rates in June we can’t rule out a hike in May as well as the recent economic data supports the move.
  • Thursday, May 4, 2018 – The Eurozone CPI inflation have risen more than expected to 1.6%, which is one step closer towards the 2% inflation target that the ECB has set. However, it’s unlikely for the ECB to engage in premature tightening measures with the inflation still below the 2% target.
  • Friday, May 5, 2018 – The NFP report will bring the latest job figures for the US economy. The NFP missed the market expectation and only posted a modest 103k of new jobs added. The market consensus looks for the job market to start heating up again and add 198k new jobs while the unemployment rate is expected to drop to 4% versus 4.1%.
  • Thursday, May 10, 2018 – The US CPI inflation figures are scheduled to be released. The last time we saw inflation dropping for the first time in the last 10 months, but the underlying inflation remains strong.
  • Tuesday, May 15, 2018 – The German GDP figures for the first quarter of 2018 are about to be released. The German government has lowered the GDP growth in 2018 to 2.3%.
  • Wednesday, May 23, 2018 – The FOMC minutes from the last Fed meeting are going to be released. It can give us more clues if the Fed is on the path to really hike rates four times in 2018.
  • Wednesday, May 30, 2018 – The US GDP figures are scheduled to be released and the market consensus is that the US economy is going to slow down to 2% versus 2.9% from the last quarter of 2017.

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