BoE, BoJ, FOMC News and Analysis
- BoE likely to hike rates this week.
- BoJ may mull over inflation forecast and target.
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Central Bank Hikes and Data Deluge Will Keep Traders Busy
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A very busy week ahead of the expected August holiday lull with a wide range of market moving events and data releases. Volatility is expected to increase ahead of three important central bank meetings while at the end of the week the latest US non-farm payroll release will provide more clarity on the US economy.
Ahead of all this, Tuesday offers up a raft of trading opportunities in different markets. In recent days the market has started to mull the idea that the BoJ will lower its inflation target and forecast – 10-year JGB yields jumped after the central bank trimmed its qe purchases – although its current 2% CPI target is unlikeley to be met for months/years to come.
The Bank of England is expected to hike rates on Thursday, while the FOMC will opine announce their policy decisions on Wednesday ahead of a September hike.
While the FOMC September decision has been baked in for the last few weeks, the UK rate decision has only been priced in recently, mainly due to a strong jobs market. Brexit continues to weigh on Sterling and will remain the dominant driver of the currency. The FOMC will hike in September by another 0.25% - the third such hike this year – and the market has already priced in a fourth hike in December. And just to keep USD traders active, on Friday we have the latest US non-farm payroll report, which will point to continued strong growth in the US jobs market.
The US dollar remains strong after Friday’s bumper GDP figures, and is well supported just under 94.00 – 38.2% Fibonacci – and is eyeing the first upside target at 94.93.
US Dollar Index Daily Price Chart (December 2017 – July 30, 2018)
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What do you think the central banks will do this week? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Nicholas.cawley@ig.com or via Twitter @nickcawley1
--- Written by Nick Cawley, Analyst
