Bank of Japan and US Fed monetary policy meetings control the market this week
This week contains 2 crucial market-moving events – The Bank of Japan (BoJ) and the US Federal Reserve’s (Fed) monetary policy meetings. Investors do not expect the Fed to raise the interest rate at the conclusion of its 2-day meeting. However, they will scrutinise the central bank’s post monetary policy statement for hints on the timing of the next rate rise. Meanwhile, the BoJ is anticipated to expand monetary easing when it meets this week.
Today, there is nothing worth mentioning from the UK. In the Eurozone, current account surplus narrowed in July, while the region’s construction output data is scheduled for release shortly. Across the Atlantic, the US NAHB housing market index will be shared later today.
Pound Sterling – UK Markets
The Pound is trading higher against its major peers this morning. Earlier in the session, a report by the property tracking website – Rightmove - showed that the average asking price for a house in Britain bounced back in September, after dropping for the previous 2 months. However, this rising tide of house prices in the UK poses a problem for first-time buyers as it outstrips their ability to own a dream home. After last week was data packed, Britain’s economic calendar seems to be taking a breather this week. On the data front, the nation’s public sector net borrowing and the CBI industrial trends survey data are due this week. In addition to this, the Bank of England’s quarterly bulletin, which contains market analysis and commentary on the central bank’s monetary policy operations, is also up for release.
On Friday, Sterling ended lower against the US Dollar, as better-than-expected inflation data from the US triggered a broad-based strength in the greenback.
US Dollar – US Markets
The greenback is trading on a weaker footing against the Pound and the common currency this morning. Market participants will monitor the US NABH housing market index, scheduled to be released later today, for further direction in the US Dollar.
On Friday, the US Dollar advanced against most of its major peers, after upbeat consumer price inflation data in the US indicated that inflation continues to move towards the Fed’s goal - raising prospects that the central bank might increase the benchmark interest rate this year. Data revealed that the US consumer price index (CPI) rose more than projected in August, on the back of higher rents and healthcare prices, offering fresh evidence that the nation’s inflation may be firming up after years of sluggish growth. In other economic news, the US Reuters/Michigan consumer sentiment index remained steady in September at its lowest level since April, as American consumers became less confident about their income and buying plans.
Euro – European Markets
The shared currency is trading mixed against the US Dollar and the Pound this morning. Data released earlier in the session showed that the Eurozone’s current account surplus narrowed in July, and the Eurozone’s construction output for July is scheduled to release in a few hours. Looking further ahead, the Euro region’s economic calendar warms up a bit this week, starting with a speech by the European Central Bank President, Mario Draghi. Other economic releases this week include the region’s consumer confidence index along with a preliminary reading of manufacturing and services purchasing managers’ indices data for this month.
On Friday, data showed that the Eurozone’s hourly labour cost grew at a slower pace in the second quarter in comparison to the first quarter. This reinforces concerns surrounding the region’s deflationary risks, and is likely to increase pressure for further monetary expansion and more aggressive fiscal policies in the Eurozone. Separately, Italian trade surplus widened in July.
Other Currencies – Highlights
The Canadian Dollar is trading on a stronger footing against the greenback this morning, tracking gains in crude oil prices. There are a couple of significant economic releases in Canada this week: Bank of Canada’s (BoC) Governor Stephen Poloz’s speech at an event in Quebec tomorrow, and the nation’s consumer price index and retail sales - a primary gauge of consumer spending. Additionally, Canada’s wholesale sales for July is due this week.
On Friday, the Canadian Dollar weakened to a 7-week low level against its US counterpart, amid a drop in oil prices and as a better-than-anticipated US consumer price data supported the greenback. A steady build-up of inflation in the US could allow the Fed to raise the interest rate this year. On the data front, Canada’s manufacturing shipments rose at a scant pace in July and missed market expectations by a wide margin, indicating that the nation’s manufacturing sector activity remains subdued.