A trio of central bank meetings are set to take place soon, with the Bank of Japan (BoJ), the Federal Reserve (Fed), and the Bank of England (BoE) all making important rate decisions. The European Central Bank (ECB) will also be in focus as key Eurozone economic data is due to be released. Additionally, the week will culminate with the crucial US jobs report.
Starting with the Bank of Japan, Governor Ueda has been in the spotlight recently due to speculation about rate hikes, hints about bond tapering, and suspicions of intervention in foreign exchange markets. The upcoming meeting on July 30-31 will likely see a decision on reducing bond purchases, with a potential rate hike still uncertain. The sluggish economy and weak consumer demand may justify caution, especially with inflation not yet at target levels.
The Federal Reserve is expected to announce its decision shortly after the BoJ meeting. With the US economy showing mild signs of a slowdown but with a strong labour market, a rate cut is unlikely in July. Fed Chair Jay Powell may hint at a dovish tilt in the policy statement but is unlikely to commit to a specific timeframe for easing. The upcoming July nonfarm payrolls report will also influence the Fed’s decision.
The Bank of England will conclude the week’s central bank decisions, with uncertainty surrounding a potential rate cut. Inflation has fallen sharply in the UK, but concerns about services inflation and slow wage growth remain. The MPC is split on whether to cut rates in August, with updated quarterly projections likely to sway their decision. A 25-bps reduction is possible, but the pound may not see significant movement either way.
In the Eurozone, economic recovery has hit a roadblock, with PMI surveys deteriorating in July. GDP data is expected to show growth, and CPI estimates will be crucial for investors. Headline inflation is projected to ease, potentially inching closer to the ECB’s target. Core inflation will also play a role in determining the euro’s performance against the dollar.
In Australia, CPI readings will be closely watched, with inflation edging higher throughout the year. The Reserve Bank of Australia may consider further tightening if CPI figures exceed expectations. The Australian dollar has been impacted by recent market volatility, and positive CPI data could provide a boost. Chinese manufacturing PMIs will also be important for Aussie traders amid concerns about China’s economy.