The U.S. stock market just experienced a pretty substantial sell of yesterday. The Dow Jones Industrial fell 3.15%, which is $831.83, from Tuesday’s close. The S&P? Down $94.66 and 3.29%. And finally, the NASDAQ, which took the largest hit percentage wise at 4.08% and -$315.97. The reason? It all depends on who you ask. Many market analysts blame the trade war with China. Some say it is the cost of borrowing and the major sell off of “FANG companies”(Facebook, Amazon, Netflix, and Google’s parent company Alphabet Inc.. Many other blame the Feds.
Announcements from any interest rate setting body provides great volatility to trade. And typically, the longer between news events, the more interest they draw. This makes today a pretty exciting day. On top of both the Federal Open Market Committee (FOMC) and Reserve Bank of Australia (RBA) having speeches by Bostic and Ellis, respectively. This is following both a speech from the Great Britain Monetary Policy Committee Member Haldane this morning and the Treasury Currency Report that is tentatively scheduled this afternoon.
Tomorrow, and this week as a whole, are big weeks for speeches and talks with major interest rate setting personnel. Staring off tomorrow, we will see Great Britain’s Monetary Policy Committee Member Broadbent speaking about the Retail Price Index to the Economic Affairs Committee in London. Not long after, we will see Canada’s Governing Council Member Wilkins speaking on a panel in Bali, titled “Empowering Women in the Workplace”. The final speech of the day will be by FOMC member Williams speaking on monetary policy at the Central Banking Forum.
Friday morning is Non-farm Payroll. Asides from interest rate changes from the FOMC, Non-Farm Payroll is one of the biggest market moving events there is. Non-Farm numbers are closely related to the ADP Payroll numbers released the Wednesday before Non-Farm. The ADP was forecast for the same as the Non-Farm announcement at 185 thousand job increase. The actually ADP announcement, however, showed an actual increase of 230 thousand. This increase can be expected to see in the announcement tomorrow at 8 AM EDT.
The Federal Open Market Committee can move the markets more than almost entity. This makes their speeches one of the biggest market movers for the U.S. news. Today, there are three of these speeches scheduled. The speeches will be coming from Brainard at 12:00 PM EDT, Mester PM 1215, and chairman Powell at 2:00 PM EDT. The thing with these speeches, however, is that they will all be in different settings.
Interest rates have been hitting the news hard recently. Rate announcements can be hard to trade due to their ability to whipsaw the market even for a straight forward seeming move. Australia’s announcement tonight at 12:30 AM EDT is unlikely to be an outlier. This is expected to be the 25th month in a row where Australia has held their interest rates at 1.5%, not wavering since set in Aug. 2016. The interest rate announcement, since late 2007, now accompanies with the Reserve Bank’s “Rate Statement” which will outline the forecasts of the economy and needs of the economy for a future rate change, even if there is no change in the rate.
Just the other day, we saw the FOMC raise interest rates a quarter percent for the U.S.. This was a big move for the USD, which will have yet another large move this week. Traditionally, the first Friday of the month is Non-Farm Payroll from the U.S. BLS. This will be Friday and usually entails some good movement in the market, which we could see tailing the FOMC announcement since the Feds look for good economic conditions while changing rates. We will also see projections on this announcement Wednesday from ADP. Australia is set to announce their interest rate statement next week as well on Wednesday.
Interest rate announcements are one of the highest volatility news events! Trading rate statements can make or break your day. Even with trading a seemingly straight-forward rate announcement (like we are expected to see today), you can be whipsawed out of a trade and end up losing. These rate announcements are more than just “lower”, “raise”, or “keep”. Accompanying these announcements are usually an economic forecast for the country, a statement of what is expected, potential timeline for next rate change, and they are usually followed by a press conference with a Q&A that brings even more movement into the market. Today, we have two.
New Zealand is one pair that brings a lot of volatility in the market. Pairs with the NZD range some of the largest values per day and show some of the most largest per minute movements as well. News for the NZD just brings in extra spokes showing moves with a potential of over 20 pips a minute. This is what can be potentially be expected to happen tonight as New Zealand releases two news events.
With a relatively slow week in the news this coming week, Wednesday is where we will be seeing the bulk of this week’s volatility. Not only will the U.S. be releasing their FOMC announcement where interest rates are projected to increase to 2.25%, yet the reserve Bank of New Zealand is expected to release their monetary statement as well (A New Zealand interest rate announcement is scheduled as well, yet, no change is expected).