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FX Week Ahead: ECB and BoJ Meetings

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As the markets head into the final week for the month of April, the economic calendar continues to steam ahead with lot of economic releases. Central bank meetings take the spotlight this week with both the European Central Bank and the Bank of Japan lined up.

No changes are expected from either of the central bank meetings this week. However, the forward guidance and the language from the respective central bank statements will be crucial in guiding the markets in the near term.

The Swedish Riksbank will also be holding its monetary policy meeting this week. No changes are expected to the interest rates but the central bank is expected to come out slightly dovish given the recent slowdown in inflation and the overall weakness in the housing sector.

On the economic front, the GDP releases will be the main theme. GDP reports from the U.S., the UK and the Eurozone (France and Spain) are expected this week, covering the first quarter of the year. Overall, the GDP reports are expected to show that economic expansion continued to pace ahead at a steady pace.

Data from the Eurozone, besides the ECB meeting and the GDP release will also feature the flash manufacturing and services PMI reports. Given the slowdown during the first quarter, investors will be looking to see how the Eurozone economy fared during the month of April.

Here’s a quick recap of the ECB and BoJ Meetings and other key economic events due this week.

ECB and BoJ to remain on the sidelines

The European Central Bank will be holding its monetary policy meeting this Thursday. The ECB is expected to keep all the key interest rates and the central bank’s quantitative easing program unchanged at this month’s meeting.

Investors will be looking to the press conference and the ECB’s monetary policy statement to ascertain what the next policy move could be. The current QE program is scheduled to run its course until the end of December this year. However, given the recent slowdown in inflation and a possible weaker GDP growth during the first quarter could keep officials to remain cautious.

For the Bank of Japan, officials will be holding the monetary policy meeting on Friday. The meeting comes following the monthly release of the BoJ’s Core CPI and other measures of inflation. A continued uptick in consumer prices for Japan could potentially see officials coming out hawkish on monetary policy.

The BoJ’s Kuroda was recently heard making hawkish comments with the Japanese economy said to be expanding at a modestly healthy pace. With officials already concerned about the downside risks of prolonged quantitative easing, BoJ officials are likely to give out a measured statement while highlight the upside in the economic growth.

 

GDP Themes: U.S, UK and the Eurozone

The GDP data remains one of the key economic releases over the week. The data will cover the United States, the UK and the Eurozone. This will be the initial or the preliminary release of the GDP and covers the first three months of the year.

The U.S. GDP is expected to advance at a pace of 2.2% in the first quarter of the year. This is a slower pace of increase in the economic activity. The U.S. economy advanced 2.9% in the last quarter of 2017 which showed a significant revision from the preliminary GDP release.

The GDP data from the Eurozone will feature the flash GDP reports from France and Spain. The outcome could potentially signal how the Eurozone economy fared during the first quarter. The flash manufacturing and services PMI reports will also be released during the week.

The GDP growth for the UK is forecast to rise 0.3% on the quarter ending March 2018. This marks a slower pace of growth following a 0.4% increase in the final quarter of 2017. On a year over year basis, the UK’s annual GDP growth is forecast to rise 1.5%, slightly higher from the 1.4% growth registered in the previous quarter.

 

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