Now that traders have mostly priced in their reactions to France’s Presidential elections last weekend, you can bet your pips that they’re looking for the next market catalysts.
Let’s take a look at the two monetary policy decisions and two central banker speeches that could affect risk sentiment and the major currencies this week:
RBA’s Philip Lowe (Thursday, April 27)
The central bank show won’t start until Thursday when Reserve Bank of Australia (RBA) head honcho Philip Lowe gives a speech at the Renminbi Global Cities Dialogue Dinner in Sydney.
We’ve heard plenty from the RBA last week when Lowe and his team communicated in their meeting minutes that Australia’s labour and housing markets are “weaker than expected,” enough to warrant “careful monitoring” over the next few months.
Will Lowe drive home the RBA’s point again this week? Remember that the central bank Governor is not one to shy away from the spotlight and has in fact used opportunities like this to share strong and pointed statements.
BOJ’s monetary policy decision (Thursday, April 27)
2:00 am GMT: Interest rate decision
3:00 am GMT: BOJ’s quarterly outlook report
6:30 am GMT: Press conference with Kuroda
Right behind Philip Lowe is the Bank of Japan (BOJ) with its monthly policy decision. Much like its previous meetings, market players aren’t expecting any changes from the central bank this month.
The BOJ will publish its quarterly economic outlook report, though, so we might still see a bit of volatility around the release. Oh, and watch out for BOJ Governor Kuroda’s presser at 6:30 am GMT!
It doesn’t take a market whiz to guess what Kuroda and his gang will talk about. In an interview last week, the BOJ head honcho already shared that:
- It’s “premature to discuss in an exact way about exit strategy.”
- Real economy is still sluggish even if it’s better than they anticipated months ago
- They will stick to their yield curve control policy
- Pace of asset purchases “will continue for some time.”
- “It’s a long way to go” before they reach their inflation target
BOJ’s Deputy Governors Hiroshi Nakaso and Kikuo Iwata also made headlines after they shared that the central bank is now studying potential exit strategies.
However, Iwata clarified that they’re not sharing deets just yet because it might create confusion especially when they’re still far from achieving their inflation targets.
So, based on the clues above, we can speculate that (a) Kuroda will likely emphasize that they’re keeping the pedal on the metal and (b) the BOJ could upgrade its GDP forecasts even as it shaves its CPI projections for fiscal year 2017.
ECB’s monetary policy decision (Thursday, April 27)
11:45 am GMT: Interest rate decision
12:30 pm GMT: ECB statement and presser with Draghi
Last month, European Central Bank (ECB) Governor Mario Draghi ruffled a lot of forex feathers when he said that there’s no “sense of urgency” to add more stimulus. What’s more, he and his gang also UPGRADED their growth and inflation outlook!
Draghi threw water to the fire, though, by saying that “a very substantial degree of monetary accommodation is still needed” because there are still no signs of a “convincing upward trend in underlying inflation.”
But that was last month. As I’ve mentioned in my Euro Zone economy snapshot, retail sales and business PMIs are higher, while employment prospects are better. But are these enough to convince the ECB to make changes to its stimulus program?
Nope. In his speech in Washington last week, Draghi nodded to the “firming and broadening” economic recovery in the region, but warned that underlying inflation is still too dependent on “very substantial” support from the ECB.
It also doesn’t make sense for the ECB to rock the boat until France chooses its next leader on May 7. They wouldn’t want to remove stimulus too quickly especially if Le Pen wins and inspires risk aversion in the European markets.
So, much like the BOJ, analysts are expecting the ECB Governor Mario Draghi and his gang to sit in their hands for another month.
That doesn’t mean that we won’t see some action, though. Market players are betting on policy changes in June when France has a new leader and the ECB has more info on the region’s economic trends.
If Draghi hints at possible shifts in policies and forward guidance in June, then we might see the euro extend its rallies this week.
But if the ECB head honcho sticks to the “inflation is still too low!” rhetoric and fails to hint at tapering or tightening in the near-term, then we might see a bit of profit-taking across the major euro pairs.
SNB’s Thomas Jordan (Friday, April 28 at 8:00 AM GMT)
Rounding up this week’s batch of central bank events is Swiss National Bank (SNB) Governor Thomas Jordan sharing his two cents about monetary and investment policy in Bern.
We don’t have far to look for Jordan’s recent sentiments. In an interview in Washington last week, the SNB top boss admitted that the franc may feel pressure during the French elections, but cautioned that they “also have our instruments to react to such a situation.”
Jordan took jawboning a couple of steps further and reminded us that their negative interest rate policy gives them more leverage policy making-wise.
He went on to add that “we of course have our willingness to intervene if necessary on the foreign-exchange market” as if he was discussing the dinner menu.
Don’t be surprised if we see more jawboning from the SNB Governor this Friday!