This week will have the Bank of Japan, Bank of England and the Federal Reserve policy meetings, where the benchmark rates are expected to remain unchanged. In addition to these policy meetings we also have important news releases such as: the GBP budget, AUD unemployment rate, USD CPI and US retail sales.
The Bank of England are expecting to keep interest rates at 0.50%. Investors will be more interested in the press conference after the event to get further hints from Mark Carney. Whilst BREXIT is still piling the pressure on the GBP, we have seen a positive rally over the last 2 weeks. With the ECB increasing their quantitative easing program by a substantial amount, the pressure is on the BoE to follow suit. If this is the case, this will send the GBP down, possibly to new lows. Pound traders will also have to keep an eye out for the Fed policy meeting as well, as it may have an influence on the price.
The Federal Reserve are also expected to leave the benchmark rate at 0.5%. The Fed will also provide updated forecasts and there will be a press conference with Janet Yellen. The likelihood of the benchmark rate being increased is very low, however, we should not rule it out. Last week the RBNZ and the ECB both surprised us with their decisions, therefore, it is possible the US benchmark rate could be lifted. The focus will be on the revised forecasts. The inflation and GDP forecast will give us a sense of where the Fed looks to be aiming for; a predicted increase in inflation could suggest they are considering increasing interest rates (if they don't this week). The underlying forecast will be the benchmark interest rate. This event will no doubt cause a great deal of volatility amongst the majority of currency pairs.
The Bank of Japan are expected to leave their benchmark rates unchanged in negative territory. Reuters cited unidentified officials saying that the BoE could possibly increase stimulus by 10tr JPY. If this is the case, we expect to see the yen weaken against it counterpart. However, bare in mind that the ECB cut 3 of its rates and increased its stimulus more than expected last week, and the euro strengthened as a result. This will have an influence on the Bank of Japan. Not increasing stimulus could be perceived as a positive move for the JPY even if it makes short-term losses.
This week will without a doubt cause a great deal of volatility. We advise you to use sufficient risk management when entering into trades around major economic news releases.