Amidst the flurry of central banks – the Bank of England, the European Central Bank, and the Federal Reserve – posturing that they will be tightening policy to various degrees, the Bank of Japan is perhaps one of the two major central banks (the other being the Swiss National Bank) that is clearly in a dovish policy stance. As inflation remains persistently below the BOJ’s medium-term +2% target, there is little reason to believe that Governor Kuroda will signal anything other than a continued push forward with extraordinary loose monetary policy.
Pairs to Watch: AUD/JPY, USD/JPY, Gold
10/11 Wednesday | 18:00 GMT | USD September FOMC Meeting Minutes
The Federal Reserve’s September policy meeting was a turning point for the US Dollar: the DXY Index established a bullish outside engulfing bar and pierced its daily 21-EMA for the first time since June 22. But the technical reversal was not without a fundamental driver. The FOMC’s decision to signal to markets that it intended on fulfilling its preset course for interest rates – as laid out initially in the December 2016 summary of economic projections (SEP) – by raising rates a total of three times in 2017 and another three times in 2018 caught market participants off guard: there was only a 45% chance of another rate hike by the end of the year; and only two hikes were priced in for 2018. Now, rate hike expectations have firmed up sharply (83% chance of a hike before the year is out, and two-and-a-half hikes are priced in for next year) – look for the FOMC minutes to reinforce this development that has carried the US Dollar higher over the past three weeks.
Pairs to Watch: EUR/USD, USD/JPY, DXY Index, Gold
10/13 Friday | 12:30 GMT | USD Advance Retail Sales & Consumer Price Index (SEP)
Consumption is the most important part of the US economy, generating nearly 70% of the headline GDP figure. The best monthly insight we have into consumption trends in the US might arguably be the Advance Retail Sales report. In September, consumption increased, according to a Bloomberg News survey, with the headline Advance Retail Sales set to increase by +1.5% (m/m). The Retail Sales Control Group, the input used to calculate GDP, is due in at +0.4% from -0.2% (m/m).
