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WEEK AHEAD:OCTOBER 3

Short Description

GBPUSD Going to Parity?

Video Script

Number one:

GBPUSD Parity?

A flash crash in the British pound last week has taken the British currency to its lowest on record versus the US dollar. GBP/USD skidded below 1.04 before rebounding sharply when the Bank of England intervened by restarting government bond purchases. The UK central bank has stablised markets but the underlying issues of government mismanagement under new Prime Minister Liz Truss as well as the unrelenting  strength of the US dollar could taken the GBP/USD forex pair down to parity.

Number two:

US NFP & Unemployment rate

The US dollar continues to surge and traders will be keeping an eye out on US Non-Farm Payrolls and the unemployment rate for September, which will be made public this Friday. The labour market is predicted to have eased a little bit with 250 thousand new jobs anticipated to have been added during September. The unemployment rate is expected to print another 3.7% just like August. Furthermore, markets will closely watch the average hourly wage as a key indicator of consumption trends that will influence inflation figures.

Number three:

RBA Interest rate decision

AUD/USD has been under pressure heading into the RBA meeting this week where a decision between a 25 and 50 basis point rate hike is on the cards. Officials are stressing the poor global outlook and consumer spending patterns as the two key sources of uncertainty influencing its choice. The Organization for Economic Co-operation and Development downgraded Australia's economic condition, indicating that the country's financial problems are far from resolved. Australia's core inflation is predicted to reach 5.4 per cent in 2022 and then drop to 4.3 per cent in 2023.

Number four:

RBNZ interest rate decision

On October 5th, the Reserve Bank of New Zealand will meet to discuss monetary policy once more as NZD/USD hits new 2022 lows. The official cash rate is currently at 3.00%, having increased dramatically over the past year from barely 0.25% at the beginning of October 2021 in reaction to the inflationary crisis. It is anticipated that this meeting would see an increase of 50 basis points, to 3.5%, and then another 50 basis points to 4.00% on November 23, the final meeting of the year 2022.

Number five:

Central Bank interventions

The FX markets have recently experienced many significant moves. One thing to watch is that central banks may intervene further to support FX rates this week, with the Chinese Yuan trading at its lowest levels since the global financial crisis, the pound sterling trading at an all-time low against the dollar, and the Japanese Yen trading at its lowest level in 20 years. Implied volatility generated from FX options indicates that a high level of volatility is anticipated.

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