Summary:

• BoE Governor Mark Carney will give his speech in Washington
• Two more central bank speakers on the agenda today
• FED is a pivotal event for this week

The beginning of the new week is very subdued with no major moves seen across the FX space. Nevertheless, it could be just calm before the storm when we take a closer look at the full macroeconomic calendar for this week. On the other hand, Monday is likely to be dominated by some central bank speakers with Carney’s one being a cherry on top.

• 4:00 pm BST – Bank of England Governor Mark Carney speech: He is scheduled to speak at IMF in Washington. After his speech a conversation with IMF managing director Christine Lagarde will take place. Taking into account the excellent performance of the pound on the back of a hawkish stance of the BoE, there is a possibility that Carney will want to use today’s opportunity to talk up the GBP once again.

Beside Carney’s speech, two more central bank speakers are expected to take the floor:

• ECB’s Lautenchlaeger – 3:30 pm BST
• BoC’s Lane – 7:30 pm BST

What to watch for the remainder of the week?

September is full of the key central bank meetings and we saw that last week when the Bank of England send the British pound soaring with GBPUSD storming above 1.34 for the first time this year. After market moving meetings of the ECB, the Bank of Canada and the Bank of England we come back to North America, this time for the meeting of the US Federal Reserve. A decision on plans to reduce the balance sheet is highly anticipated and what the Fed is about to say could be decisive for the US dollar fate in the final quarter of the year.

FOMC statement (Wednesday, 7pm BST), Janet Yellen conference (Wednesday, 7:30pm): After increasing interest rates twice this year (in March and June) the Fed is widely expected to stay on hold this time. However, it may take even more important decision – to start shrinking its balance sheet. The Fed increased its balance sheet from about $900 billion in 2009 to mind boggling $4.5 trillion in 2014 when it terminated its bond purchase program. This balance sum has remained broadly unchanged since then as the Fed kept reinvesting proceeds from coupons and maturing bonds. The US central bank has long made it clear that it wants to normalize its policy not only by increasing rates but also adjusting a size of the balance sheet and a decision on the first step in this area is expected this week. Do not anticipate any shocking news – the Fed will not sell the bonds but merely let some of the maturing papers out of its balance sheet and perhaps do that at a very slow pace at the beginning (perhaps just $10 billion per month to start with). We also expect the Fed to reduce expectations for future level of interest rates. However, the latest data on inflation was encouraging and market expectations regarding future rate hikes are extremely low so the meeting could be actually some kind of a chance for the greenback.

UK – retail sales data (Wednesday, 9:30 am): The British pound was a star last week after it rallied following a report on consumer prices and especially the Bank of England meeting. The Bank made it clear that a rate hike could be within reach and most likely occur sooner than the market pricing suggests. That skyrocketed GBP rate to post-Brexit Vote highs as traders had to adjust their positioning quite rapidly. However, the Bank needs to be aware that the economy remains in a mixed shape. The data on sales will show if the consumer is as ready for higher rates as the MPC seems to be. Exepct big moves on GBPUSD on Wednesday as we have major events for both currencies in that pair on that day.

Canada – the CPI report (Friday, 1:30 pm): The Canadian dollar has been the strongest G10 currency in the third quarter so far as the Bank of Canada increased interest rates twice during that period of time. As USDCAD nears 1.20 some traders could wonder if this market isn’t perhaps a bit overheated. We know that the Canadian economy has been doing great on a growth side but inflation has been lagging behind so far. A data on inflation could provide an answer if there’s more fuel to this CAD rally.

The GBPUSD is trying to break a crucial resistance line on a daily time frame. If it manages to do so, an increase toward 1.3830 could be likely. Keep in mind that BoE’s Carney could shake the pound across the board. Source: xStation5