The week ahead is full of important economic events, but one stands out of the crowd – the FOMC decision and press conference that follows shortly after. Last week, the European Central Bank (ECB) announced further easing in the Euro area, as it signaled more purchases under its PEPP program. This week, the Fed, the Bank of England, and the Bank of Japan are scheduled to release their statements, so the volatility in the FX market is likely to be higher than usual.
The Trading Week Starts Wednesday
Until the Fed’s decision and press conference on Wednesday, only the Retail Sales in the United States may influence the market’s volatility. The data, expected tomorrow, forecasts a drop in the retail sales for the month of February. Any positive surprise should add fuel to the stock market’s rally because it signals that consumer confidence is coming back.
As mentioned already, Wednesday is all about the Fed. Besides the FOMC Statement, the market participants will find out the FOMC economic projections. This is the trickiest part of Wednesday’s event, because the way the Fed projects the rate in the years ahead may influence the markets today. The dots are very important, as they reflect the rate projections in the upcoming years, signaling either a hawkish or a dovish Fed.
Thursday, it is all about the Bank of England. The expectations are that the bank will do nothing at this month’s meeting, but traders would still want to know if there is anything new regarding negative rates. Last week, the data for the first two months of the year showed that the trade with the European Union decreased dramatically, in a sign of what Brexit may mean in the long run. The pound remains bid across the board, with the GBPUSD hovering close to 1.40.
The Bank of Japan’s decision follows, and this time is an important one because it had recently announced that it is willing to ease the pressure on its yield curve control policy. Such a move should lead to a higher JPY in the upcoming months, yet the market is doing just the opposite – selling the JPY. Perhaps the market is calling the central bank a bluff, and if the Bank of Japan delivers, we may see some interesting price action in the JPY pairs. Both the EURJPY and the USDJPY pairs are bid ahead of the event, trading close to 130, respectively 110.