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Forecast - The Clash of the Fed, BoJ and RBNZ Rate Decision

Forecast - The Clash of the Fed, BoJ and RBNZ Rate Decision

2016-09-20 04:18:00
John Kicklighter, Chief Strategist
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Talking Points:

  • The sudden rise in activity this past week may be waylaid by high-level event risk ahead
  • While the docket will offer wide scope for data, the three rate decisions Wednesday are heaviest event risk
  • In order of potency (under extreme outcomes), the rate decisions go: Fed to BoJ to RBNZ

Harness the power of big data to evaluate millions of historical price points to calculate the probabilities of short-term market moves using the GSI Indicator.

Chief Strategist John Kicklighter discusses the top Forex fundamental themes for the coming week of trading. We are still in the transition of extremely quiet market conditions - the product of seasonal and structural confluence - into more productive ones. And, while we may start off this new period with ranges standing and volatility measures cooling their heels, it is only a temporary pause predicated on the distraction of high level event risk. Amid a docket that will cover general sentiment to Brexit to European growth, the most important event risk is the monetary policy decisions scheduled on Wednesday.

In chronological order, we await the release of the Bank of Japan (BoJ), Federal Reserve (Fed) and Reserve Bank of New Zealand (RBNZ) policy decisions through the middle of the week. While the New Zealand central bank's deliberation can generate significant influence for New Zealand Dollar crosses - the Kiwi is the best performing major over the past 3 months - its global impact is limited. Not so for the BoJ and Fed. The Japanese authority maintains one of the most extremely accommodative programs in the developed world. It is also one of the best examples of a central bank losing credibility and thereby influence over its stated economic targets and implicit financial targets. With an evaluation of past efforts due, this will be important for all corners.

Overall, the Fed's policy decision is easily the most omnipotent event we have seen in some time. Not only is the US unique in pursuing a normalizing course when its peers expand the limits of easing, but it is a critical component of the global policy effort. The Fed is laying the course to pull back from extremes that can illustrate to the market that conditions can hold steady when others follow in its wake. And, moving in that direction to bolster confidence and returns while reducing exposure is a necessity. Will the Fed tempt the market or avoid unsettling the markets? We discuss these and other events/themes in the recording of this week's fundamental webinar.

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