FX Week Ahead

BoJ and SNB to take the limelight

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The economic calendar for the week ahead is expected to be relatively quiet. The central bank meetings due this week include the Bank of Japan and the Swiss national bank.

No changes are expected from either of the central banks at this week’s meeting. On the economic front, the Eurozone will be reporting on its final inflation figures. In the UK, data covers the monthly inflation data.


New Zealand will be releasing its quarterly GDP figures this week on late Wednesday. The data comes ahead of next week’s RBNZ meeting. However, the GDP numbers are unlikely to impact monetary policy.

On Friday, data from Canada will see the inflation figures. Canada’s inflation has been running hot as per the data from the previous month. Retail sales numbers are also due later in the day.

For the U.S. dollar, the economic data this week will focus on the housing starts and building permits. The recent slowdown in the housing markets continues to raise some eyebrows amid the rate hike cycle from the Fed. However, overall data remains quiet as far as the USD is concerned.

Here’s a quick recap of the market events due this coming week.

Bank of Japan – A non-event or merely a dismissal of facts

The Bank of Japan’s monetary policy meeting will continue to puzzle the markets. For the large part, markets are convinced that the BoJ will start to wind down its QE operations. However, the central bank is yet to admit this fact.

The last significant change from the Bank of Japan came from the July meeting. The central bank introduced a modest tweak to its forward guidance while it was seen to be loosening its yield target on the 10-year JGB’s

It is a well-known fact that the consumption tax is scheduled to take place in October 2019. Speculation is high that this could potentially provide the boost needed to stoke inflation higher.

So far, the Bank of Japan’s massive bond purchases has failed to have the desired effect. Inflation in Japan is moving at a much slower pace than initially anticipated.

This week’s BoJ meeting will not most likely provide any significant surprises. However, investors will be closely watching the statement and press conference for clues on when the BoJ could probably start to make it public about winding down its QE operations.

Swiss National Bank to remain on the sidelines

The Swiss National Bank will be holding its quarterly monetary policy meeting this week. The SNB has been maintaining a loose monetary policy since it removed the peg against the euro three years ago.

At its previous monetary policy meeting, the SNB left the key policy rate unchanged. The target rate for the 3-month Libor is between -1.25% and -0.25% with the interest rate on sight deposits fixed at -0.75%. Although the risks have seen somewhat lesser, the central bank reiterated its commitment to intervene in the foreign exchange markets if need be.

The biggest challenge for the SNB has been in maintaining a competitive rate for the Swiss franc. This comes amid Switzerland’s dependence on the EU for trade. As a result, an appreciation of the Swiss franc is indeed not welcome.

As the European central bank starts to end its QE program this December, the SNB is expected to sit on its hands at this week’s meeting. The wait and watch approach will most likely continue. Any policy changes from the SNB is unlikely to come before the ECB makes its intentions clear.

As a result, this week’s SNB meeting is likely to be a non-event. The data comes ahead of Thursday’s Bank of England monetary policy meeting. No changes are expected from the BoE with the markets pricing the next rate hike only sometime toward the latter half of next year.



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