Economic data for the week ahead will culminate in a busy three days starting from Wednesday. The FOMC meeting is scheduled for Wednesday followed by the ECB’s monetary policy meeting on Thursday and concluding with the Bank of Japan’s monetary policy meeting on Friday.
While rates are expected to remain unchanged with the ECB and the BoJ, the FOMC is all set to hike rates for a second time this year. The markets are likely to see a lot of volatility during these three days.
Elsewhere, data from the Eurozone will see the final inflation figures for the month of May. With the preliminary inflation report suggesting that consumer prices increased during the month, an upbeat inflation report is likely to boost the sentiment in the euro currency which has been roiled by the uncertainty from Italy.
Besides the FOMC meeting, it is going to be a busy week for the U.S. dollar as economic indicators include inflation and retail sales covering the month of May.
Here’s a quick recap of the economic events for the week ahead.
FOMC: Short term rates set to rise
As exciting as it may sound, the markets have fully priced in the prospects of a rate hike at this week’s meeting. The Federal Reserve will be holding its two day monetary policy meeting this week, concluding on Wednesday.
The short term interest rates are expected to be hiked by 25 basis points and the rate hike is expected to be a unanimous decision. The central bank had previously argued the case for higher rate hikes amid an uptick in the economy, jobs and inflation. However, at the same time the Federal Reserve is also expected to exercise cautious in the backdrop of the global trade uncertainty.
The FOMC rate decision will be followed by up the press conference as well as the release of the quarterly economic projections. This is likely to give a lot of information for investors to anticipate the future path of rate hikes. While the Fed is expected to sound hawkish at today’s meeting, it could potentially soften this tone attributing the uncertainty on trade between the U.S. and its trading partners.
ECB: The last big meeting before September 2018
Taking over the baton from the FOMC, the European Central Bank will be holding its monetary policy meeting on Thursday. The ECB is expected to hold the key interest rates unchanged at this week’s meeting. For investors, this week’s ECB meeting will be key as it would be the final big meeting head of the September monetary policy decision.
The central bank had signaled that it would be ending its QE purchases in September 2018. The ECB is currently purchasing 30 billion euro in bonds and this is expected to be the last leg of the bond purchases. Recent uncertainty from Italy and a weak patch of inflation and growth data could cloud the ECB’s decision.
However, going by the recent preliminary inflation figures, the headline inflation was seen at 1.9%, just a percentage point away from the ECB’s 2% inflation target rate. The core inflation rate, which is closely watched by the ECB has also inched higher.
Last week, reports from Bloomberg suggested that according to sources, the ECB was likely to debate on its QE plan this week. However, there was no news whether a decision would be taken. Still, the rather hawkish speculation is likely to give rise to positive sentiment in the common currency. On the other hand, if the ECB does not make any mention of its QE exit plans, the markets are likely to sell off the common currency.
