Brace yourselves, forex fellas! This week is gonna be an eventful one with FOUR major central bank decisions lined up. If you wanna read up on what happened before and what’s expected this time, here’s a quick rundown for y’all:
FOMC Statement (Mar. 15, 6:00 pm GMT)
First up, we’ve got no less than the folks at the U.S. Federal Reserve whom many are expecting to be gearing up for a 0.25% interest rate hike. Odds are strongly in favor of a tightening move, with the latest non-farm payrolls report printing a higher than expected increase that caused the CME Group’s Fedwatch Tool to show a 93% likelihood for a March rate hike.
With a tightening announcement pretty much priced in, forex junkies are now looking to the updated Fed forecasts on growth and inflation to get an idea of whether or not another rate hike can be expected by June. As of the latest NFP release, traders are placing the odds at 55.4% for another 0.25% increase in three months, so any indication that FOMC policymakers are inclined to slow down from here could be treated as a disappointment.
Note that, even with hawkish rhetoric from majority of the committee members, there is still a considerable amount of uncertainty when it comes to the Trump administration’s fiscal policy changes so Fed head honcho might need to respond to a few questions on that topic during the presser. Cautious remarks could spur profit-taking activity if dollar bulls start doubting that the Fed can stick to its plan of hiking rates three times this year.
BOJ Decision (Mar. 16, Asian session)
Next, we’ve got the policymakers over at the Bank of Japan scheduled to announce their monetary policy decision halfway into the Asian session on March 16. No changes to bond purchases are expected, although BOJ fellas don’t necessarily wait for this particular event to make their own yield curve targeting adjustments like they did after Trump’s inauguration.
Besides, the Japanese economy has been showing some green shoots these days, particularly when it comes to inflation. Even though the Tokyo core CPI fell short of estimates, the national core CPI returned to positive territory with a 0.1% uptick in February while the BOJ core CPI printed a 0.2% gain for the same month, higher than the earlier 0.1% increase.
However, the outlook is still a bit shaky, with household spending down 1.2% year-over-year in February and the index for consumer confidence down from 43.2 to 43.1 in the same month. The Economy Watchers Sentiment index also ticked lower from 49.8 to 48.6 to reflect increased pessimism among folks who directly monitor consumer behavior.
Even though the BOJ might refrain from taking any monetary policy action this week, don’t forget to stay tuned to the press conference at 6:30 am GMT because Kuroda might have to respond to questions on bond yields and JPY strength, both of which could do a number on yen pairs.
SNB Decision (Mar. 16, 8:30 am GMT)
Just a few hours after the BOJ decision, Swiss National Bank Chairman Thomas Jordan will step up to the podium to deliver their own policy statement. No actual changes are expected as well, but market participants seem to be bracing themselves for Jordan’s usual jawboning spiel.
For the newbies just tuning in, lemme tell you that the SNB is notorious for intervening the currency market in order to keep the value of the franc down. A few years back, it even imposed a peg on EUR/CHF at 1.2000 to ensure that the Swiss exports of cheese, knives, and chocolates stay affordable and in demand. However, in a shocking announcement back in 2015, Jordan and his fellow policymakers decided to scrap this peg, wreaking havoc on the forex market.
Now the franc ain’t exactly makin’ it rain these days and Swiss CPI has been pretty upbeat, so there might not be much reason for SNB fellas to be in intervention mode. Still, it’s also worth noting that SNB head Jordan did drop some comments against franc strength in his recent testimonies and that SNB foreign currency reserves figure rose from 644 billion CHF to 668 billion CHF a couple of weeks back.
BOE Statement (Mar. 16, 12:00 pm GMT)
Last but certainly not least is the Bank of England’s monetary policy statement and meeting minutes due right after the SNB’s moment in the spotlight. Governor Carney and his fellow policymakers are expected to sit on their hands for the time being, likely in a unanimous vote to keep rates at 0.25% and bond purchases at 435 billion GBP.
In their February “Super Thursday” announcement, BOE Governor Carney admitted that they may have underestimated inflation and consumer spending in the past but warned that plenty of risks are still on the horizon. He noted that the jump in price levels may be temporary and that wage inflation is likely to stay subdued.
In my latest Economic Snapshot of the United Kingdom, I showed y’all how trade activity picked up on account of rising production and a weaker pound earlier this year. However, leading indicators such as PMI readings from the manufacturing, services, and construction sectors have failed to impress in the past couple of months. To top it off, consumer spending has taken hits from a combo of rising price levels and slow wage growth so there might be some reason for the BOE to sound cautious.
Phew! Quite a lot, eh? As I always say, there’s no shame in sitting on the sidelines if you’re not comfortable trading around additional volatility, which is characteristic of these top-tier events. Just make sure you keep tabs on what happened and how currencies reacted so you can make adjustments in your setups and trading biases.