It’s bound to be an exciting trading week with three central bank events lined up! What can we expect from each event?
1. FOMC meeting minutes (Wed, 8:00 pm GMT)
Unless you’ve been living under a rock, you’d remember that the December FOMC statement was when Fed policymakers finally decided to taper. They announced a $10 billion reduction in bond purchases and it would be interesting to see how many Fed officials supported this move.
Bear in mind that Fed head Bernanke is set to hand over his baton to incoming Fed Chairperson Janet Yellen this year. With that, you should also keep close tabs on Yellen’s remarks as these could indicate whether the central bank is likely to announce another taper in their next meeting or not.
2. BOE interest rate decision (Thurs, 1:00 pm GMT)
Another event set to rock the boat this week is the BOE interest rate decision. Although no actual changes to asset purchases or interest rates are expected, market watchers will be all eyes and ears for any possible changes in forward guidance. After all, the U.K. economy’s recovery seems to have stalled recently while inflation has edged closer to target.
There have been instances though when pound pairs barely budge during the BOE rate decision, particularly when nothing groundbreaking is announced. Traders tend to wait for more details to be announced during the release of the MPC meeting minutes a few days later, but it wouldn’t hurt to adjust stops and minimize your exposure if you have any pound trades open during the event!
3. ECB interest rate decision (Thurs, 2:00 pm GMT)
Last but not least is the much-awaited ECB interest rate decision scheduled to take place on Thursday. Recall that the central bank slashed rates back in November but decided to take a pause in their December policy statement. Will Draghi surprise the markets again or will he sit on his hands?
Talks of negative deposit rates or further LTRO could resurface as the event draws near, especially since the euro zone has been showing signs of economic weakness every now and then. The prospect of deflation in several periphery nations has also been a hot topic, which might lead traders to price in expectations of more stimulus from the ECB.
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