Weekly Market Outlook: BoJ meeting and UK GDP

BOJ To Hold Interest Rates Steady

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Economic data for the week ahead will remain somewhat quiet with only the Bank of Japan due to hold its monetary policy meeting on Friday.

On the data front, the U.S. retail sales, producer prices index and inflation data, some of which cover the month of January are due this week.

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The impact of the December/January partial government shutdown continues to weigh on this week’s economic releases, with most of them still due for January.

The markets continue to closely watch the developments from the UK as the March 29th deadline for Brexit edges closer. The UK will be releasing its monthly GDP report alongside the industrial, manufacturing and construction output reports.

Data from Australia, New Zealand and most of the eurozone this week remains quiet.

Here’s a quick recap of what’s to come in the currency markets this week.

Bank of Japan – No changes expected

The Bank of Japan will be holding its monetary policy meeting this week. The BOJ is one of the few major central banks that has continued its quantitative easing policy and loose monetary policy. This comes at a time when other central banks have moved towards tightening interest rates.

The BoJ has been struggling to spark inflationary pressures in Japan. Recent reports showed that the BoJ’s core inflation measure rose 1.1% on the year. This is still a far way off the BoJ’s 2.0% inflation target rate.

Central bank officials continue to pin hopes that the sales tax, which is due to be effective from October this year, will help to give inflation the much-needed boost. As a result, until then, the BoJ is expected to remain on the sidelines.

The Bank of Japan has maintained interest rates at -0.10%. Meanwhile, it continues to hold yields on the 10-year Japanese government bonds near zero percent. This is unlikely to change any time soon.

Data Dump from the United States

The impact of the partial government shutdown continues to weigh on the economic reports from the U.S. This week, we could see the release of a backlog of data including retail sales reports for January and February. We are also expecting inflation reports for January.

Overall, the data is expected to show that the U.S. economy continues to move along at a steady pace despite the shutdown. However, recent reports suggested that personal income and spending had eased in December. Investors will be looking to see if this trend continued into January.

The U.S. economy rose at a pace of 2.6% in the three months ending December, according to data from the Commerce Department. While the preliminary estimates were better than the median forecasts, there is speculation that growth might have slowed even more during the first quarter of this year.

With economic reports covering January and February, investors will get a broad idea of how the economy fared during the first three months of the year. This comes as the FOMC is due to hold its monetary policy meeting later this month.

GDP trackers from sources such as CNBC, Atlanta Federal Reserve and the New York Federal Reserve, all point to the fact that growth in the first quarter might have slowed significantly compared to the fourth quarter GDP reports.

As a result, the economic reports for this week could potentially shape investor expectations on how growth fared. They could also predict the possible policy responses from the Federal Reserve.

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