This week's news will be important for the markets

Volatility is likely to increase this week, as the Reserve Bank of Australia (RBA) and the Bank of England (BOE) are set to announce their monetary policy decisions. While these decisions are critical for the markets, the focus will be on Thursdays NFP report (Non-Farm Payroll) and Friday's U.S. unemployment figures.

Yesterday, Australia's central bank announced its decision on the Australian Liquidity Rate. And in terms of the AUD, it is one of the best performing currencies against the US dollar after the Fed opened dollar swap lines to better respond to the coronavirus pandemic. The AUDUSD pair has risen over a thousand pips - from 0.55 to 0.65 - in just over a month, closely following the performance of the U.S. stock market.

Bank of England decision - A non-event for the GBP

On Thursday, the BOE is expected to keep its current monetary policy intact as well as the size of its asset purchase facility. England's central bank is one of the major ones working closely with the Fed to allow businesses to access USD financing when needed.

It has responded quickly to the current economic crisis by providing liquidity, reducing rates and increasing the asset purchase facility. As a result, the pound rose against the dollar from the March low of 1.16 to well above 1.24 - a move similar to the AUDUSD.

Double-digit unemployment numbers

In both examples, AUD and GBP, the common denominator is the USD. The global reserve currency is in high demand in times of crisis, as investors seek shelter in its safe-haven characteristics.

The USD's decline is also responsible for the rebound in U.S. equity markets. The DJIA (Dow Jones Industrial Average) and the S&P500 just finished one of the best months in history, and a weaker currency helped.

However, as investors applaud recent market performance, Friday's payroll figures will likely be a cold shower. The predicted double-digit unemployment rate is probably a reality, and the only question is how much it will rise and how long it will stay there.

The Fed's financial aid and government support cannot continue forever without major damage. Even if the U.S. economy reopens, it will do so gradually, in other words, it will be difficult for people to find a new job or even to return to their old job. This means that the consequences of the pandemic are not yet fully felt.

Friday's press release will tell us how bad the situation is over there. Those who are late this week should expect more volatility around this release as investors revise their hopes.