Markets are starting the new trading week with a cautious risk-off tone as they gear up from important risk events. This week’s focus will be on major central banks – in the United States, the United Kingdom and Japan.
The Federal Reserve meets on June 14 and 15, and all eyes will be on its rate decision. After the latest dismal nonfarm payrolls report, it is not expected that the FOMC will raise rates at this June meeting. Fed Chair Janet Yellen’s speech on Monday did not make any reference to the timing of the next hike, so investors hope that on this coming Wednesday the US central bank will give a clearer picture on its rate path.
The Bank of Japan will draw some attention on Thursday, while the Bank of England also meets on the same day. It is highly unlikely that the BoE will change its policy stance just a week before the EU referendum. On the other hand, the BoJ would make a move to add stimulus as recent data have indicated that Japan’s economy has been struggling.
In terms of economic data, there will be some important releases out of the UK and the US.
The US publishes retail sales, industrial production and inflation numbers. The data will provide insight into whether the US economy is showing signs of rebounding after a weak first quarter.
Out of the UK, inflation and labour market data are due. The April inflation figures showed consumer prices just rose 0.3%, which is well below the BoE’s 2% target rate. Meanwhile, the unemployment rate remained at 5.1%. However, latest survey data showed that the hiring trend has weakened, which would make it unlikely for the unemployment rate to drop for now. Brexit concerns also contributed to the slowdown in hiring.
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