Australian, U.K. and Japanese Data to be Market Movers in the Days Ahead
The upcoming week could be another directional one, as several top-tier events are lined up. Central bank statements are set to take place around the middle of the week and this could set the tone for longer-term price action among a lot of forex pairs.
The most anticipated event is probably the FOMC statement, during which Fed officials might clarify if they are indeed moving closer to hiking interest rates. So far, data from the US economy has been more or less stable, as hiring gains have continued to impress. However, the latest retail sales report indicated another decline in consumer spending due mostly to seasonal cold weather conditions.
In their latest monetary policy meeting minutes, Fed officials indicated that they would change their forward guidance once they are considering hiking interest rates. With that, market participants will pay close attention to any changes in rhetoric which might offer clues on the Fed’s monetary policy bias. Keep in mind that Fed head Janet Yellen has been trying to keep rate hike expectations in check, although some hawkish Fed officials have said that they might tighten sooner than expected.
The BOJ monetary policy statement is also an event to watch out for, as weak data from Japan have increased calls for further monetary policy easing. Inflation and spending figures have consistently come in below expectations, which means that the economy is having a hard time recovering from the sales tax hike and the slump in price levels. Dovish remarks could lead to a strong break higher, particularly for the USDJPY currency pair while reassuring comments could still keep the yen supported during risk-off days.
Another central bank to take center stage in the week is the SNB, which might not announce any major changes to its policy. After all, the franc has been depreciating to its levels prior to the Swiss central bank’s decision to scrap the currency peg. This means that intervention isn’t a threat for now, although SNB head Jordan might decide to jawbone since EURCHF is likely to fall with the ECB quantitative easing program going on.
In the UK, the release of the BOE minutes could be the highlight of the pound’s week, as this should show whether MPC members are holding on to their upbeat bias even as the economy has seen more than its fair share of weak figures. Services PMI has recently surprised to the downside, indicating a smaller contribution to overall economic growth. Manufacturing production has also been dismal, leading some market watchers to wonder if BOE Governor Carney might be less optimistic.
Also lined up from the UK is its jobs release, which has also been surprising to the upside just like the US NFP report. Another strong hiring figure could lead to a bounce for the pound, which has dropped below the key 1.5000 level to the US dollar lately.
RBA monetary policy meeting minutes are up for release early in the week and this might remind market participants that the central bank is still open to further rate cuts if necessary. While the previous week’s jobs report indicated that easing isn’t urgently needed just yet, RBA officials could highlight other weak spots in the economy and trigger Aussie weakness just the same.
Meanwhile, Canada is set to print its CPI and retail sales readings, both of which could determine whether the BOC might shift back to a less upbeat stance or not. Recall that the Canadian central bank confirmed that they are no longer looking to cut interest rates in the near future as signs of improvement have been seen in industries apart from oil. Also scheduled for the week is New Zealand’s dairy auction, which might show a fall in milk prices due to recent contamination threats in Fonterra.