BoJ, FOMC, Gold – Markets this week (Apr 25 – 29)

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Forex Forecast

A week marked by central bank expectations and a surprise decision saw the yen resume its uptrend as the BoJ left monetary policy untouched, while delaying its inflation forecasts as well. Amid the dovish views from the FOMC, RBNZ and the BoJ, gold found favor as prices continued to move above the $1250 handle this week, briefly trading at the $1280 levels.

Here’s a quick recap of this week’s economic events that shaped the markets.

Central banks stand pat on policy

The US Federal Reserve, the RBNZ and the Bank of Japan met over the week with monetary policies unchanged. While widely expected to remain steady from the FOMC and the RBNZ, the Bank of Japan sprang a surprise leaving monetary policy steady. Expectations were heavily inclined for the BoJ to expand its monetary policy this week after the yen had fallen strongly in the previous months. Ahead of the BoJ event, the yen fell sharply in anticipation of the easing, but the markets were severely disappointed at the yen strengthened by over 3.0% on Thursday after the Bank of Japan held its monetary policy steady. USDJPY fell back to trade close to 107 levels at the time of writing.

Weak GDP growth in the US and UK

Preliminary estimates from the first quarter GDP data in the US showed one of the worst performances in over two years. US GDP expanded at a pace of 0.50% in the first three months of the year, following a strong fourth quarter performance in 2015. The weak GDP data was underscored by weaker manufacturing that has plagued the global economies at the start of this year. In the UK, besides manufacturing, the uncertainty stemming from the Brexit referendum saw the UK’s GDP expand at a pace of 0.40%. Investments into the country continued to decline as businesses preferred to stay on the sidelines into the outcome of the EU membership referendum vote.

Flight to safety rekindles Gold rally

Gold prices were back in the news this week as prices touched a 6-week high on Thursday. By Friday morning gold was seen hovering near 1280 after prices surged nearly 1.60% on Thursday following the Bank of Japan’s decision. Gold also found favor among investors this week as US earnings continued to paint a mixed picture. Sales of Apple and Microsoft were down this week with US equities rally losing momentum. Adding to the picture was the uncertainty among global central banks who continue to maintain an accommodative monetary policy. With inflation now falling back after a surprising spike in March, the dovish views from the central banks is likely to keep the safe haven bids supporting gold’s rally.

Economic events this week

  • German Ifo business climate 106.6 vs. 1071
  • US new home sales 511k vs. 521k
  • US Core durable goods orders m/m -0.20% vs. 0.60%; durable goods orders m/m 0.80% vs. 1.90%
  • US CB consumer confidence 94.2 vs. 95.8
  • Australia CPI q/q -0.20% vs. 0.30%; trimmed mean CPI q/q 0.20% vs. 0.50%
  • UK preliminary GDP estimates Q1 2016 0.40% vs. 0.40%
  • Federal Reserve leaves Fed funds rate unchanged at 0.50%
  • RBNZ leaves interest rate unchanged at 2.25%
  • BoJ Core CPI m/m 1.10% vs. 1.10%
  • BoJ leaves monetary policy unchanged
  • Germany preliminary CPI m/m -0.20% vs. -0.20%
  • US Q1 advance GDP estimates 0.50% vs. 0.70%
  • Australia PPI q/q -0.20% vs. 0.20%
  • Germany retail sales m/m -1.10% vs. 0.30%
  • Eurozone core CPI flash estimates y/y 0.80% vs. 0.90%; CPI y/y -0.20% vs. -0.10%
  • Canada GDP m/m -0.10% vs. -0.10%
  • US Core PCE price index m/m 0.10% vs. 0.10%
  • US employment cost index q/q 0.60% vs. 0.60%
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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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