What to Expect From the 3 Central Bank Meeting Minutes This Week

Welcome to a fresh trading week, forex junkies!

This week, we have boatloads of economic data heading our way, including the meeting minutes of three major central banks. Let’s take a look at what the RBA, BOJ, and BOE could say.

Reserve Bank of Australia (RBA)

When:Tuesday (July 17), 1:30 am GMT

What was said in the last meeting?

In its interest rate decision two weeks ago, the RBA gang had decided to keep rates steady at 3.50% after cutting borrowing costs four times since November.

RBA head Glenn Stevens shared his optimism for the world economy, saying that it has picked up in the early months of 2012 from late 2011. The pace of Australia‘s economic growth has also exceeded expectations with the employment industry firming up a little.

What to expect:

The minutes will most likely show the optimistic tone of the central bank, though it won’t reflect the recent disappointment in Australia’s unemployment numbers and China’s GDP concerns.

Considering that the Land Down Under is now facing a 5.2% jobless rate and all but 800 jobs were wiped out from May, it could be difficult for investors to celebrate the RBA’s optimism for the economy.

Nonetheless, watch the minutes closely! It could give clues on just how important the jobs number and Chinese data were in the RBA’s decision. If both factors had a big influence on the RBA’s decision, then we might see a change in tune when the RBA announces its interest rates next month.

Bank of Japan (BOJ)

When: Tuesday (July 17), 11:50 pm GMT

What was said in the last meeting?

Japanese central bankers surprised no one when they kept their rates steady between 0.00%-0.10%. However, they almost had everyone’s heart skip a beat when they didn’t increase their asset purchase program.

Remember that the ECB, BOE, and even the PBoC have recently resorted to more easing measures. But the BOJ stood firm amid pressures to follow suit.

Based on the tone of the statement, it seems that the Japanese are more optimistic in their economic outlook than before. Reconstruction efforts following the tsunami and earthquake that hit Japan last year have propped up domestic demand. As for the global economy, the bank sees other economies emerging from deceleration to help propel Japan to a moderate recovery.

And so, with all the positive vibe, the central bank didn’t see any need to increase asset purchases. Instead, they merely tweaked it. According to BOJ Governor Shirakawa, they will increase their short-term purchases by 5 trillion JPY and reduce their long-term securities purchases by the same amount.

What to expect:

In my opinion, there’s still enough fuel left for the yen to rally should the minutes reflect the optimism expressed by the central bank. After all, that would set the BOJ apart from most of its counterparts who are keen on providing their economies with more stimulus.

Then again, the minutes could also turn out to be a non-event. The BOJ’s newfound-optimism might already be old news to the markets.

Bank of England (BOE)

When: Wednesday (July 18), 8:30 am GMT

What was said in the last meeting?

While the BOE blokes kept rates unchanged at 0.50%, they did increase their quantitative easing program. A bleak outlook for the economy as well as domestic pressures convinced the central bank to start the printing presses and provide the economy with an additional 50 billion GBP boost in liquidity.

What to expect:

Some market junkies think that the minutes could spell an action-packed day for the pound. Given the BOE’s pessimistic tone in its last interest rate decision, it seems that the general consensus in the market is for the minutes to reveal a cautious tone from the central bank.

More importantly though, traders will be on their toes to find out what the outlook of the MPC members are for future monetary policy.

The infamous BOE dove Adam Posen has said in a speech last week that the increase in asset purchases is “enough for now.” However, while his remarks imply a wait-and-see approach from the BOE in the coming months, BOE Governor Mervyn King isn’t convinced that 50 billion GBP is enough. He said that the British economy “doesn’t show a great deal of signs of impending recovery.”

On the other hand, there are also those who say that the minutes may not be as action-packed as when the CPI report for June is released on Tuesday (8:30 am GMT). Like the other major currencies, prospects of further easing will weigh on the pound. This means that market participants will also be looking closely at the inflation report to see how it would factor in to the bank’s future decisions. If you’re thinking of trading the BOE MPC minutes, make sure you also keep tabs on the U.K.’s CPI report!

The forecast is for the CPI to post an annual uptick of 2.7%. A better-than-expected figure would probably be bullish for the pound as it would give BOE MPC members one reason to hold off further easing. However, a lower-than-expected reading will probably be bearish for the pound.

There ya go, folks! So which among the three releases are you looking to trade?