Central banks are again the focus this week, with several speeches, statements and minutes out from around the world. Early in the week, the focus will be on Europe, Japan and Australia, before shifting over to the US and UK through the middle of the week. With so many different central bank speeches and testimonies released in succession, it looks set to be an interesting trading week.
Mario Draghi testifies tonight at the Committee on Economic and Monetary Affairs of the European Parliament. Traders will be looking for clues about any further actions the ECB might undertake, as well as any further details on the ECB’s T-LTRO’s. There is a French Bank Holiday today also, so liquidity may be slightly lower than usual.
Tuesday should see a lively Asian session – with the RBA meeting minutes set to be watched over for any changes in perceptions of the economy, as well as the BoJ’s Monetary policy statement and press conference. The BoJ is not yet expected to expand its massive easing program, however some beliefs are building that a change could be implemented towards the end of the year, to ensure the BoJ meets its policy goals.
The RBA has held rates at 2.50% for some time now, however anaemic growth has kept open the possibility for further rate cuts. Expected rate movements are currently far from finding a consensus, with different bank analysts calling for moves both up and down in the overnight cash rate. Far from being a clear cut case, this will depend heavily on whether the RBA begins to lean towards Macro-prudential Regulation, like the BoE and RBNZ. Such an inclination would allow the RBA to begin moving rates lower to help the wider economy, whilst also helping to ensure that the housing market does not get out of control. As well as this, developments in Chinese growth will have an outsized effect on policy choice – Chinese GDP is out on Wednesday morning, which should give some indication.
Tuesday also sees some attention on the Pound – CPI data is due, followed by a testimony by Mark Carney on the Financial Stability Report. The CPI data is important, however expectations of rate rises are equally driven by considerations on the housing market at present. CPI is expected to remain low and stable, at 1.6% – however the testimony that comes later in the day will be important for traders, as it pertains to stability in the housing market and how the BoE might address this with or without rate increases.
Janet Yellen is also set to testify before the Senate Banking Committee over Tuesday and Wednesday. It will be the Wednesday meeting which is particularly important, as the Chairwoman is open to Q & A, and any surprise answers may spook or excite the markets.