Which Central Bank do you pay most attention to?
Trading Look: Real GDP growth rate is projected to surpass +2% for 2013
• Japan's economy has started re-expanding since late-4Q 2012 and it recorded +4% annualized real GDP growth in 1Q 2013. We had thought that such a high pace of economic growth would not be sustainable after 1Q but in reality, economic data and information have continued to improve and in the latest months they have given some positive surprises. What's more, leading indicators for Japan's exports, US manufacturing ISM new orders index in particular, have shown improvements. We now admit that our previous economic forecast seems a little too conservative, having upgraded our GDP forecast into 2014 rather materially.
• First, our revised estimate for 2Q 2013 real GDP growth is +3.8% qoq annualized compared with +2.6% of the previous estimate. A surge in public investment and stronger-than-expected contribution from net exports are the main reasons for the upgrade. The 2Q GDP statistics are due out on 12 August.
• Second, we have revised up our GDP forecast into 1Q 2014 owing to several factors. Leading indicators for global manufacturing production and Japan's exports have shown signs of improvement lately as mentioned. Private capex related numbers have come in stronger with core machinery orders expanding substantially in May and a leading survey for corporate capex plans for FY13 indicating a material upgrade to plans.
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Central banks and their decisions usually move their respective currencies and associated currency crosses. It is important to watch out for their meetings and more important their press conferences as well as minutes as traders will react and adjust their positions which is why volume as well as volatility tends to increase. Sometimes the result of a meeting can alter the direction of a currency entirely.
I tend to keep an eye out for meetings of The Fed, ECB, Bank of England, Bank of Japan and the Reserve Bank of Australia as they cover the currency pairs I trade. I usually do not trade the release, but I do keep an eye out for what they say and enter their meetings with caution.