Forex: a week filled with central bank announcements/speeches

The coming week is full of central bankers who will be speaking at various events. Central bankers' communication, which is part of the principle of forward-looking orientation, is important to ensure that financial market participants understand their message. The ECB's Lagarde conference has already organised one this weekend.

Sometimes the market reacts in a way that central bankers cannot anticipate. For example, the rise of the EUR/USD to 1.20 this year is not something that the ECB likes, but there is not much it can do about it. If we look at the financial conditions in the Eurozone this year and compare them to those in the US, this market is right to send the EUR/USD up.

Before we look at the events and data for the week ahead, the key issue in developed markets remains quantitative easing (QE). A de facto tool to combat the current economic recession, it is on every central bank's agenda this year.

This week's events and data

The week began with a disappointing Chinese GDP - the economy grew by only 5.0%, compared to 5.4% in the third quarter. However, this is solid growth considering what's happening in the rest of the world, and positive data from China is still supporting the Australian dollar (AUD) every time it falls.

Today (Tuesday), the Reserve Bank of Australia (RBA) will publish its minutes of the previous meeting. Although it is important for the AUD, it should be a non-event this time as the RBA did not change anything at the previous meeting.

On Wednesday, the Canadian CPI is likely to cause some volatility on CAD pairs. In addition, inflation is released in the UK on the same day, just a few hours before.

On Thursday, the governor of the Bank of England will deliver a speech at the annual navigation lines summit. The week ends on Friday with the UK and EU PMIs for the month.

Despite the events mentioned so far, the big one for the financial markets remains the American Trump/Biden election. For this reason it is likely that the market will not develop as expected and that price ranges will dominate price action. Caution is required before such a major event, and traders generally reduce risk well in advance.