Weekly Market Outlook: FOMC and BoE to dominate headlines this week

The week ahead will be a busy one as the markets slow down close to the holiday season. The Fed, Bank of England and the Bank of Japan will be holding their monetary policy meetings this week.

While the BoJ is expected to remain on the sidelines, the Fed’s rate hike decision will be closely watched. In the UK, the BoE’s meeting also comes amid increased uncertainty due to Brexit. Economic data will also cover the inflation and retail spending from the UK.

Data from Australia will see the monthly unemployment report. The Australian labor market has been recently making strides as more slack is being absorbed. However, a disappointing print could further increase concerns on the economy with speculation already rising that the RBA could turn hawkish.

Data from Canada this week will see the release of the monthly inflation figures. Consumer prices have been easing following the previous couple of months where inflation surged strongly. With the Bank of Canada putting monetary policy hold, the inflation data comes after a strong jobs report in November.

Here’s a quick recap of the main economic events due this week.

BoE meeting comes amid Brexit uncertainty

The Bank of England will be holding its monetary policy meeting amid the uncertainty surrounding Brexit. With the deadline for the March 2019 Brexit date set, officials are yet to agree on the terms of the Brexit departure.

The Bank of England has repeatedly been warning that a Brexit could potentially lead the Central Bank to hike rates more aggressively. This is expected as a weaker currency could stoke inflation which is already above the Central Bank’s 2.0% inflation target rate.

Ahead of the BoE meeting, the latest inflation report will be coming out followed by retail sales data. Recent forward-looking economic indicators have already signaled a potential slowdown in the UK’s growth during the fourth quarter of the year.

The UK’s economy has been one of the worse performing economies among the G7 nations. With the Brexit still in the headline, the Bank of England is unlikely to make any changes to its monetary policy meeting this week. The Central Bank hiked interest rates twice so far and is currently at 0.75%.

All eyes on the Fed

The Federal Reserve Bank’s FOMC will be holding its monetary policy meeting this week. Concluding the two-day event, the Fed will be releasing its interest rate decision and statement on 19 December.

The markets have discounted a quarter-point rate hike at this week’s meeting. The Fed is all set to raise interest rates higher to 2.25% – 2.50% marking the fourth rate hike of this year. Attention will turn to the Fed’s staff economic projections. The U.S. enjoyed a steady growth rate this year, and the projections will show how officials see the progress next year. Inflation and unemployment forecasts will also be released alongside the predictions on the Fed funds rate.

The Fed Chair, Jerome Powell will be speaking following the release of the Fed’s statement. Given the fact that Powell indicated that U.S. interest rates were near neutral, investors will be looking for clues on how the Fed’s rate projections will be for the year ahead.

Investors are currently forecasting that the Fed will hike rates only two times next year. Concerns of a slowdown in the U.S. economy could potentially hamper any plans of further rate hikes.

Besides the Fed’s meeting, the U.S. building permits and housing starts will be coming out this week as well. The final revised GDP for the third quarter is due on Friday, but no changes are expected as the U.S. economy advanced by 3.5% in the three months ending September 2018.