The spotlight is on the central banks this week!
The BOJ, FOMC, SNB and BOE will all be making their monetary policy decisions, and here’s what’s expected.
Don’t forget to review which factors drove forex market price action last week, too.
Major Economic Events:
RBA monetary policy meeting minutes (Sept. 21, 1:30 am GMT) – Aussie pairs could get a fresh kick of volatility early in the week, as the RBA will be printing the minutes of its latest policy decision.
In their announcement earlier this month, the RBA kept rates on hold as expected while citing that they’re inclined to keep asset purchases going for much longer.
BOJ monetary policy statement (Sept. 22) – No actual changes are expected from the BOJ in this week’s rate decision, but a more dovish tone might be in the cards.
Keep in mind that the Japanese economy continues to struggle against the headwinds of the pandemic, which has kept a number of regions in a state of emergency for a while.
FOMC statement (Sept. 22, 6:00 pm GMT) – The main event for the week would likely be the Fed decision, as many are counting on policymakers to unveil more details on their taper plans.
The Fed is expected to confirm that they’d start tapering asset purchases in November, especially with a number of FOMC members already dropping several hints in their speeches.
The central bank is also scheduled to release their updated economic projections, and any major revisions to growth and inflation estimates could give more clues on future policy decision.
As always, pay close attention to changes in the dot plot forecast since this would impact market interest rate expectations.
Euro zone flash PMI readings (Sept. 23, starting 7:15 am GMT) – It’s the third week of the month, so it’s time for a fresh batch of eurozone PMIs!
France is expecting another round of declines for its manufacturing and services PMIs, although both sectors would likely report an expansion in activity.
Germany might report a drop from 62.6 to 61.3 for its manufacturing PMI and a dip from 60.8 to 60.3 for its services PMI.
These should bring the region’s aggregate manufacturing PMI down from 61.4 to 60.4 and the services PMI from 59.0 to 58.4.
SNB monetary policy decision (Sept. 23, 7:30 am GMT) – This is not usually a market mover, but once in a blue moon it can be a big shocker!
No actual interest rate changes are expected from the Swiss central bank, and jawboning might be kept at a minimum since the franc is trading at five-month lows against most rivals.
BOE monetary policy decision (Sept. 23, 11:00 am GMT) – The BOE is likely to keep rates on hold at 0.10% and asset purchases unchanged at 875B GBP, but the breakdown of the MPC votes might be of particular interest.
In their earlier decision, lone wolf Saunders voted to reduce gilt purchases to 830B GBP, so it will be interesting to see if other hawkish members joined him this time.
Still, Governor Bailey revealed that the MPC was split between deciding whether or not inflation has been strong enough to warrant a hike soon. Note that the latest round of CPI readings have been waaay higher than expected and that a couple of new members will be voting this time.
Forex Setup of the Week: GBP/JPY
Guppy has formed lower highs and found support at the 149.35 area, creating a descending triangle on its 4-hour time frame.
Price just bounced off the triangle top and might be setting its sights on the bottom again.
Technical indicators appear to be confirming a bearish move, as Stochastic is heading down and the moving averages are holding as dynamic resistance.
Still, the upcoming BOE decision could shake things up if MPC members turn up the hawkish vibes.
Keep in mind that U.K. inflation has been hella strong in August, possibly prompting some policymakers to consider tightening monetary policy sooner rather than later.
If you’re bullish on this one, better wait for either a test of the triangle support or an upside break past the top to confirm that a large rally is in order.
