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WEEK AHEAD: OCT 25

Short Description

BOJ, ECB, Big Tech earnings...

Video Script

Hi everyone, I’m happy to be here again previewing the week ahead for you-especially with all the action happening now in forex markets. I’m going to analyse the big moves in commodity currencies as well as touch on what should be the focus of the week - Big Tech earnings - including from Apple and Facebook. Then as usual I’ll round off with the economic calendar, which consists of the BOJ and ECB meetings as well as US GDP. Stay right there!

 

As you’ll know from your charts - the US dollar has been weakening over the past couple of weeks - that comes off the back of several weeks of gains. I think there’s a couple of things behind this - one is that rate hike expectations are picking up at other central banks. The clearest example is the Bank of England, where officials have all-but agreed on a UK rate hike this year.

 

The other aspect is rising commodities. The price of fossil fuels from coal to oil just keeps rising, and that is dragging up other commodities from copper to coffee. The countries that export these commodities benefit from higher prices and as such their currencies are rising. The three major currencies that stand out are the Loonie, Aussie and Kiwi  dollar. Quite often we talk about the value of the dollar impacting commodities but for now I think its commodities driving the dollar- and while oil keeps rising the dollar could be on the backfoot.

 

Ok let’s turn our attention to the stock market for a moment. We touched a record high last week in the Dow Jones Industrial Average, but the Nasdaq is lagging. Why? Because tech stocks are underperforming. Now this week those same big tech stocks report Q3 earnings. These companies have been reporting gigantic profit growth and in a strange way that’s the problem- massive growth is already priced in. Last week Netflix beat earnings expectations and offered a favourable outlook for Q4, but the stock still dropped afterwards. Similar reactions next week could be a problem for any catch-up move in the Nasdaq.

 

And you know I have to say it - if you can take a second to give this video a thumbs up for the YouTube algorithm! It really helps let more people see these videos.

 

OK let’s round off with the economic calendar. There are three central bank meetings - the Bank of Canada, ECB and the BOJ. Danske Bank described this ECB meeting as a ‘prelude to December’ - which is when the ECB release its next set of projections. This BOJ meeting will be the most interesting one for a while - there is a new Prime Minister in Japan who is talking about moving away from ‘Abenomics’ - part of which is BOJ monetary stimulus - and the yen has been dropping sharply. I suspect we see a more optimistic outlook from the BOJ coupled with expectations for rising inflation. The Bank of Canada is expected to further taper its asset purchases to one billion dollars per week at this meeting, which offers extra support to the Loonie currency. The last thing is US GDP. Of course the US economy will grow at a slower pace as we get further into the recovery from the pandemic - the key thing for the US dollar is that it doesn’t slow much quicker than expected.

 

And then just finally let me give you the timings for those big tech earnings this week. Facebook reports third quarter results on Monday 25th, Microsoft and Alphabet have their Q3 earnings releases on Tuesday 26th then Apple and Amazon report on Thursday 28th.

 

Right thanks everyone, good luck trading this week and make sure to click on subscribe so you don’t miss the next episode of the week ahead.

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