There’s no shortage of forex market catalysts this week, as we’ve got THREE major central bank events lined up. Better start your trading preps early to see what’s in store, figure out how currencies might react, and gauge how long-term trends could be affected. Up and at ’em, folks!
1. RBA monetary policy meeting minutes (Nov. 17, 1:30 am GMT)
The Reserve Bank of Australia (RBA) is set to get the ball rolling on Tuesday’s Asian trading session with the release of its November monetary policy meeting minutes. If you recall, this particular rate statement was greeted by a strong bullish forex reaction from the Australian dollar mostly because policymakers seemed less dovish than usual.
In particular, RBA Governor Stevens acknowledged that “prospects for an improvement in economic conditions had firmed a little over recent months” and that employment growth is strengthening. The transcript of their meeting should shed more light on the policymakers’ assessment of international and domestic economic conditions, with forex junkies likely to pay close attention to their remarks on inflation, trade activity, and the housing market.
2. FOMC meeting minutes (Nov. 18, 8:00 pm GMT)
Perhaps the biggest market-mover this week might be the FOMC minutes, as most forex traders are expecting more definitive clues that the Fed is on track towards hiking interest rates in December. Then again, as I always say, with great expectations comes an even greater chance of disappointment.
While the October Fed decision and the upbeat NFP release got forex market watchers all pumped up for a December liftoff, these hopes were dimmed by bleak U.S. retail sales and PPI data last week. It didn’t help that some FOMC members showed a bit of hesitation when it comes to tightening too soon, with Fed official Evans pointing out that he’d rather see stronger signs of an inflation pickup before increasing borrowing costs.
The upcoming FOMC minutes release should show whether or not more policymakers are shifting to a more hawkish stance and gearing up for a rate hike next month. If majority of Fed officials express eagerness to tighten, the U.S. dollar might be in for further upside until the end of the year. On the other hand, the lack of any hawkish commitment from policymakers could mean plenty of disappointment among dollar bulls.
3. BOJ interest rate decision (Nov. 19, Asian session)
Last but certainly not least is the Bank of Japan (BOJ), which has been stubbornly sitting on its hands for quite some time. Even though calls for additional stimulus have intensified due to weakening economic conditions in Japan, BOJ policymakers maintained that they have been seeing signs of progress and that there is no need to increase their current level of asset purchases.
In fact, one policymaker (Takahide Kiuchi) had been consistently voting to taper asset purchases and to adopt a more flexible inflation-targeting scheme. Although he has always been outvoted by the rest of his BOJ buddies, majority of the policymakers don’t seem to be giving off any dovish vibes either.
With that, the BOJ is expected to reiterate that their QQE program is having its intended effect and that they would keep calm and carry on until their 2% inflation target is reached. But even if the actual rate statement doesn’t generate much forex volatility, stay on the lookout for any potential spikes among yen pairs during the BOJ conference before the end of the trading session.