The financial markets are relatively steady as the week starts with stock markets extending recovery in Asia. But European indices open near flat only. Three central bank meetings will be the main focus this week. FOMC is widely expected to keep interest rate unchanged at 0.50% this week. The chance of a March rate hike receded much since the start of the year due to turmoils in the stock and energy markets. Traders would be eager to know how the recent slump in oil and global stocks would change Fed's view on the economy. But Fed will possibly just hints that it will hold their hands until the financial markets further stabilize. And we might see muted reactions in dollar to the FOMC statement and volatility could be triggered by the Q4 GDP data to be released on Friday instead. Nonetheless, risk aversion could come back to hit the market if Fed sounds hawkish in the statement.
RBNZ is expected to keep the overnight cash rate unchanged at 2.50% on Thursday. Back in December, the central bank cut the OCR by 25bps already and noted that "the Bank will reduce rates if circumstances warrant”. The weaker than expected Q4 CPI reading prompted some speculations for RBNZ cut but it may happen only later this year. But should RBNZ hints that such cut would happen at the next meeting, Kiwi would likely be hit hard and would possibly drag Aussie down too.
BOJ is also widely expected to keep monetary policies unchanged on Friday. BoJ governor Haruhiko Kuroda noted again that the central bank could expand its stimulus "if necessary" and there is "further room to expand" easing. Nonetheless, he also emphasized that the world is not on the brink of sharp deflation. And, a more rapid rebound in oil price could push Japan's inflation back to the 2% goal. BoJ currency project to hit target by late 2016 into early 2017. But traders have been raising their bets on more BoJ easing this year after recent development n the financial markets.
Here are some highlights for the week ahead:
- Tuesday: Swiss trade balance; US house prices, consumer confidence
- Wednesday: Australia CPI; German Gfk consumer sentiment; US new home sales, FOMC rate decision
- Thursday: RBNZ rate decision, New Zealand trade balance; Japan retail sales; German CPI; UK GDP; US durables, pending home sales, jobless claims
- Friday: BoJ rate decision; Japan CPI, unemployment, industrial production; Australia PPI; UK Gfk consumer sentiment; Swiss KOF; Eurozone CPI; Canada GDP, RMPI and IPPI; US GDP trade balance, employment cost index; Chicago PMI