FX Week Ahead: BoE and SNB expected to remain on the sidelines

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After a busy week of central bank line ups last week, interest rate hikes and announcements of tapering the QE program, the week ahead promises to be a lot quieter despite a few central bank meetings lined up.

The Bank of England and the Swiss national bank will be holding their respective monetary policy decisions this week. No major changes are expected from either of the central banks.

Besides the central bank decisions, central bank heads including Mario Draghi from the ECB, Jerome Powell from the FOMC, Kuroda from the BoJ are scheduled to speak over the week. Following the recent monetary policy meetings, investors will be closely waiting for further clues from the respective central bank chiefs, on future monetary policy decisions.

On the economic front, New Zealand’s quarterly GDP figures are expected this week followed by Canada’s inflation numbers later in the week. OPEC members will be holding their semi-annual meeting Vienna this week as well.

Here’s a quick recap of the economic events for the week ahead.

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Bank of England to remain on the sidelines

The Bank of England’s monetary policy meeting this week is unlikely to be a major event with the markets already anticipating another rate hike from the central bank as early as August. However, following the recent economic reports, it is likely that the BoE will have something to reflect upon.

Last week was a busy week for the British pound which saw the release of inflation, jobs, retail sales and manufacturing and industrial production figures. The data showed that consumer prices remained tame, rising at the pace of 2.4% on the year ending May. This was the same pace of gains registered the month before.

On the other hand, the labor market data showed that while the UK’s unemployment rate remained steady, wage growth was seen weakening again. However, it is unlikely to have a major impact on the markets, merely due to the fact that real wages continues to remain slightly higher. On other fronts, with the recent weakness in the industrial and production and construction sectors, growth remains a key concern.

The Bank of England was expected to hike rates in May, but postponed the decision due to the fact that the first quarter economic data showed a nearly stagnant economy with forward looking indicators suggesting that the slowdown would continue.

Heading into this week’s meeting, the BoE is likely to strike a cautious but an optimistic tone on the markets and keeping the expectation alive about a possible rate hike in August.

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OPEC meetings – Volatility in oil prices likely

Members of the OPEC and Russia are scheduled to meet this week on Friday for the semi-annual meeting in Vienna. Among the discussions, the current situation about Iran being sanctioned and being cut out from the oil markets alongside questions of whether to bridge the supply gap remains.

The U.S. President Trump also added pressure to OPEC leaders as he asked them to increase supply. OPEC had decided to run with the current supply limit until the end of December 2018. But following the deadline, no further clarity is being given.

Amid the pressure from the U.S. President Trump and the fact that the nation continues to increase its own domestic oil supply, OPEC leaders are likely to talk about the future possibility on the supply side. For the moment, the vast uncertainty surrounding oil prices in 2019 is a cause for volatility.

Saudi Arabia is also expected to announce an increase in production in order to make up for the loss from Iran’s production. However, there has been no decision made about this either.

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