The forex markets are rather steady today as traders await three central bank meetings later in the week, including FOMC, RBNZ and BoJ. Yen pared back some gains as traders turned cautious. USD/JPY surged to a three week high on Friday on speculations of monetary policy adjustment by BoJ this week. It's reported that board members are discussing negative rates on loans, which might come in concert with a deeper cut to the interest rate paid on reserves, after cutting its benchmark rate to -0.1% in January. Technically, yen is staying in medium term up trend against Dollar, Euro and Sterling. But the developments are raising chance of trend reversals with bullish convergence condition in daily MACDs of USD/JPY, EUR/JPY and GBP/JPY. BoJ meeting this week could be the defining momentum medium term direction in Yen.
FOMC meeting on Wednesday will be another major focus. It is widely anticipated that the Fed would not act in April and hints to rate hike in June should be limited. The 30-Day Fed Fund futures have prices in only around 2% chance of a rate hike this month and 20% in June. Recent comments from Fed officials suggested that policy makers are becoming more comfortable with the economy as well as the financial markets. Recent jump in oil price might have also raised their outlook on inflation. It seems that Fed is still on track for two more rate hikes this year. And if that's the case, there should be some hints for a hike in June from this week's statement.
New Zealand Finance Minister Bill English was reported to have sent a "letter of expectations" to RBNZ, as the central bank Governor Graeme Wheeler, who is solely responsible for interest rate decisions, has so far failed to return inflation to the midpoint of his 1% to 3%. We expect the RBNZ to keep its powder dry this month, though policymakers would warn of recent strength in New Zealand dollar and pledge to ease further if inflation stays subdued.
On the data front, German Ifo business climate, UK CBI trends total orders and US new home sales will be featured later today. Looking ahead, US and UK Q1 GDPs will be the major focus of the week in addition to the central bank meetings. Australia, Japan and Eurozone will also release CPI. Other events to note include:
- Tuesday: UK BBA mortgage approvals; US durable goods orders, S&P Case-Shiller house price, consumer confidence
- Wednesday: Australia CPI; Japan all industry index; Swiss UBS consumption indicator; German Gfk consumer sentiment, Eurozone M3; UK GDP; US trade balance, pending home sales, FOMC rate decision
- Thursday: RBNZ rate decision; Japan CPI, retail sales, industrial production, unemployment; Australia import price; German CPI, unemployment; US GDP
- Friday: UK Gfk consumer sentiment; Australia PPI; German retail sales, Eurozone CPI, unemployment rate; Swiss KOF; UK M4, mortgage approvals; Canada GDP, IPPI and RMPI; US personal income and spending, Chicago PMI.