It’s central bank week, ladies and gents! We’ve got FOUR major monetary policy decisions lined up in the next few days so y’all better start figuring out your game plan for these top-tier events. Here’s a rundown of what to expect for each rate statement.
1. FOMC Statement (June 15, 6:00 pm GMT)
First up, we’ve got Fed Chairperson Yellen and her FOMC buddies set to announce their policy decision during Wednesday’s New York trading session. If you recall, market participants and a handful of FOMC members had actually been gearing up for a June interest rate hike earlier in the year only to have the dismal May NFP report throw cold water on these hopes.
Because of that, forex junkies are bracing themselves for a round of cautious comments from the Fed officials this week, possibly accompanied by a few downgrades to growth and inflation forecasts as well. What makes this particular FOMC statement much more exciting is that a press conference is scheduled after their actual announcement so head honcho Yellen might be able to drop more hints on what the Fed has up its sleeve.
In her latest testimony, Yellen expressed disappointment over the hiring slowdown, dialing down her surprisingly hawkish tone from her earlier speeches. She still reiterated that a rate hike could be appropriate in the coming months, offering positive remarks on other aspects of the economy.
Should the Fed stay optimistic in their statement this week and keep speculations of a July hike in play, the Greenback might be able to erase its post-NFP losses. Don’t forget to review my Economic Snapshot of the U.S. to see how it’s been doing lately!
2. BOJ Monetary Policy Statement (June 16, Asian session)
The BOJ statement this week could also prove to be an action-packed one, as traders are waiting to see how the central bank would react to the yen’s strong rallies. As you’ve probably noticed, the Japanese currency took advantage of the recent USD selloff to benefit from risk-off flows.
Even though Japanese authorities have agreed to avoid competitive currency devaluation, they can’t help but jawbone or caution about the effects of a strong yen whenever it rallies beyond their comfort zone. If so, the yen could be forced to retreat as market watchers price in the prospect of intervention.
On the flip side, policymakers might also have a thing or two to say about PM Abe’s decision to delay the next sales tax hike, acknowledging how this can keep consumer spending and domestic price levels propped up for much longer. In that case, the yen could hold on to its gains and go for more without worrying about additional stimulus anytime soon.
3. SNB Decision (June 16, 7:30 am GMT)
The SNB announcement is usually a non-event… except of course for those instances when Chairman Jordan and his gang of policymakers decide to announce drastic policy changes. Their upcoming decision isn’t expected to be one of those market shockers, although central bank officials might also express their concerns about the franc’s strength.
You see, the Swiss currency has been acting as a safe-haven of sorts in the European region, taking advantage of the outflows from the U.K. and the euro zone whenever traders are feeling the Brexit jitters. Now it’s no secret that the SNB is willing to do whatever it takes to ensure that their currency stays weak in order to retain their competitive advantage in trade, even if it means a little bit of jawboning here and there.
Bear in mind that the SNB foreign currency reserves report has been showing gains for the past three months, keeping market participants wary of small and steady intervention efforts from the central bank.
4. BOE Decision (June 16, 11:00 am GMT)
Last but certainly not least is the BOE decision, which Governor Carney might take as an opportunity to sway voters in favor of staying in the EU. By the looks of the latest Brexit polls, the “leave” camp has been stepping up its game as the referendum is just a week away so it won’t be surprising if BOE policymakers remind voters about the risks that this could bring to the U.K. economy.
A number of top-tier U.K. reports are set to be release ahead of this rate decision but it’s highly likely that a potential Brexit would be the main focus of the central bank for now. If BOE policymakers sound convincing enough to snatch the lead away from pro-Brexit voters in the next batch of polls, the British pound might be able to regain ground.
As always, if you’re not comfortable trading around these event risks, there’s no shame in sitting on the sidelines and watching forex price action unfold. Be careful out there!
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