This week the market will be waiting for four central bank decisions about interest rates. Additionally, the statement should present expectations regarding further steps in interest rates. Investors are waiting for the decision of the European Central Bank, the Bank of Japan, Canada and Norway.
The first meeting of the European Central Bank this year may not bring any important information for markets and thus may have a very moderate impact on the EUR/USD exchange rate. During this meeting, no new ECB economic forecasts will be published, and no changes in interest rates or QE program are expected. The deposit rate is expected to remain unchanged at -0.5 percent, the refinancing rate at 0.0 percent, and QE is still expected to be EUR 20 billion per month. The decision of the European Central Bank will be published on Thursday, January 23 at 13:45. In turn, at 14:30, a press conference will start after the ECB meeting with Christine Lagarde as the head.
Meanwhile, on Tuesday, January 21 at night, the Bank of Japan will announce its decision on monetary policy. It seems that we might not see any changes here, which is still to support inflation and economic growth in Japan. This may be also supported by the actions of the government, which in the last month announced fiscal expenditure of USD 120 billion. Therefore, it seems that with a good sentiment in the markets, the yen from a monetary and fiscal perspective, may not have arguments to strengthen. Recently, the USD/JPY pair reached the highest level since May 2019, approaching the trend line starting from December 2016.
On Wednesday, January 22 at 16:00 the Bank of Canada's decision will be announced. The Bank of Canada is in a fairly comfortable position because inflation in Canada is in target. Nevertheless, it is worth remembering a series of interest rate cuts in the United States, which BoC may also pay attention to. In addition, statements on the economic outlook may be important, as their deterioration could increase pressure on interest rates cuts in Canada in the coming months and thus could also potentially weaken CAD.
The Bank of Norway will make its decision on Thursday, 23 January at 10:00. After stopping the sale of NOK by even a series of interest rate increases from the end of 2018 from 0.5 percent up to 1.5 percent Norges Bank is unlikely to change monetary policy approach at this time. This may be due to the recent statement by the Governor of the NB "the inflation is close to the target, and capacity utilisation is somewhat above a normal level. The krone depreciation will likely push up inflation somewhat, while it seems that wage growth will remain moderate ahead. Growth in the mainland economy is slowing. With a policy rate close to the current level, there are prospects that inflation will remain close to the inflation target, and that capacity utilisation will decline towards a normal level".
To sum up, despite four central bank meetings, the market does not expect greater volatility due to the lack of expectations regarding changes in interest rates now and in the foreseeable future. The British pound looks the most interesting, where the expected volatility seems to be the highest in anticipation of the next macroeconomic data and the decision of the Bank of England on 30 January.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
