Weekly Market Outlook: Central bank meetings to continue

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Economic data for the week ahead will see the momentum being maintained. Following the ECB’s meeting last week, the focus shifts to other central banks.

This week, the Federal Reserve, the Bank of England, the Bank of Japan, and the Swiss National Bank will be holding their respective monetary policy meetings.

Among the various central banks, the Fed’s meeting will be closely watched.

Elsewhere, economic data over the week will see New Zealand releasing its GDP figures, while Canada will be coming out with inflation and retail sales numbers.

China will be releasing the industrial production and retail sales figures which are expected to improve.

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USD Busy with Economic Reports and Monetary Policy

The week ahead will be somewhat busy as far as the US dollar is concerned. A mix of forward-looking economic reports alongside the Fed’s monetary policy decision is on the docket this week. Investors head into the week ahead with expectations.

US Housing Data on the Tap

The week ahead will see various measures of the housing market. These include building permits, housing starts, and existing home sales reports.

Existing home sales could rebound after falling for two consecutive months. Meanwhile, building permits are forecast to slow modestly during the period.

But with the Fed meeting being the big-ticket item, the economic reports could be brushed aside.

Fed Expected to Cut Interest Rates

The central bank concludes its two-day FOMC meeting on Wednesday. The meeting will see a release of the central bank’s decision on interest rates. There will also be fresh economic projections and the Fed members’ dot plot.

Markets are already discounting a quarter basis point rate cut this week. As a result, the Fed funds rate will move down to 1.75%-2.00%. The economic projections and the dot plot will be of interest. Fed Chair, Jerome Powell will also be hosting a press conference later in the day.

The Fed meeting comes amid President Trump’s call for lower interest rates.

Will There be any Surprises from Japan?

This week will be somewhat busy as far as the yen is concerned. The week ahead will see various reports such as trade balance and inflation numbers. Not to forget, the Bank of Japan’s meeting is due on Thursday.

The events could keep the yen somewhat volatile. The BoJ meeting comes just a few hours after the FOMC meeting.

Trade Balance and Inflation Numbers

Ahead of the BoJ meeting, trade balance figures are due.

In July, Japan’s exports fell for eight consecutive months. This coincided with investor confidence turning negative as well for the first time in six years. It was as a result of a fall out with the US and China trade dispute.

On Friday, Japan will be releasing its inflation figures too. The national core CPI figures are due. Expectations show a 0.5% increase in the core CPI. This marks an unchanged print from the previous report.

Anything new from the Bank of Japan?

The Bank of Japan’s monetary policy meeting might not garner that much attention as that of the Fed. But recent narrative from various policymakers shows growing concerns. Inflation remains stubbornly low.

There is a slight consensus that the Bank of Japan could ease policy further this week. This comes amid the flattening yield curve. The solution to this is seen by lowering the short-term rates even further.

Japan’s interest rates currently stand at -0.10%. While not fully discounted, a surprise rate cut could, however, jolt the markets. It should be mentioned that the BoJ previously tried this approach when it lowered interest rates to -0.10%.

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