FX Week Ahead: Fed meeting minutes and US inflation

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April BoC meeting

Following a rather volatile week, which started with China announcing retaliatory tariffs on U.S. imports and the equity markets gyrating, the week ahead will see investors turning their attention to the Fed meeting minutes and US inflation which stands out amid a rather quiet economic calendar.

Elsewhere, central bank chiefs including; BoJ’s Kuroda, the Bank of England’s Mark Carney and RBA’s Lowe are scheduled to speak over the week. From the Eurozone, the German Bundesbank president and a potential candidate for the next ECB president, Jens Weidmann will also be speaking. Investors will be interested to see the remarks from these central bankers which could set the expectations for future path of monetary policy.

As far as economic data is concerned, the economic calendar for the week ahead will see the BoC’s business outlook survey and inflation data from China. The ECB will also be releasing its monetary policy meeting minutes this week.

Here’s a quick recap of the key economic events due this week including the Fed meeting minutes and US inflation.

Fed meeting minutes and US inflation

The FOMC meeting minutes will be the main event risk for the currency markets this week. The data will cover the FOMC meeting that was held in March. The central bank had raised interest rates by a quarter point to bring the Fed funds rate to 1.75%.

The meeting minutes will likely shed light on the deliberations among the policy makers. The FOMC signaled that interest rate hike path would remain unchanged, as policy makers forecast three rate hikes for this year which was the same as the December FOMC meeting.

Ahead of the Fed meeting, the U.S. consumer price index data will be coming out which will give a glimpse into how consumer prices behaved in the month of March. Although the Fed uses the core PCE as a preferred gauge of inflation the inflation data this week could spark expectations if the data surprises to the upside. Economists forecast that the U.S. headline inflation was flat during the month but this is expected to push the yearly inflation rate to 2.3%, up from 2.2% previously.

The core inflation rate is forecast to rise 0.2% on the month pushing the core CPI to 2.1% at an annual pace. This would mark the first increase in core CPI rate above the 2.0% inflation rate that the Federal Reserve has been targeting.

Central bank speeches: BoJ, RBA, BoE

The week ahead will also see speeches from various heads of central banks which includes the Bank of Japan, the Reserve Bank of Australia and the Bank of England. The respective central banks will be speaking at various occasions and investors are likely to pay close attention to the remarks in an effort to speculate on the central bank’s forward guidance.

For the Bank of England, the speech by Mark Carney will be the main event as the markets are starting to discount a rate hike at the May BoE monetary policy meeting. However, the recent downtick in business activity during the first quarter could likely bring some uncertainty.

The RBA Governor Lowe’s speech is unlikely to be a market event with the RBA signaling indirectly that interest rates were likely to remain unchanged for the remainder of the year.

The BoJ Governor Kuroda’s speech comes mid-week. The central bank chief is expected to speak at a conference in Tokyo. The recent uptick in consumer prices has sparked speculation of possible tightening from the BoJ as the next policy move. However, Kuroda is likely to toe the line and maintain a neutral tone.

With no changes to monetary policy expected in the month of April, the central banker speeches comes ahead of what could be a crucial month in May.

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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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