5 Monetary Policy Statements to Watch Out for This Week

It looks like major central banks want to start September with a bang! We’ve got five monetary policy statements lined up so let’s gather ’round and figure out how these could rock the forex market this week.

Reserve Bank of Australia (Tues, 5:30 am GMT)

RBA Governor Glenn Stevens and his men are set to get the ball rolling with their monetary policy announcement in tomorrow’s Asian trading session, although they are expected to keep rates on hold at 2.50% for the time being. With that, market watchers are likely to pay close attention to the accompanying statement to see if any future policy changes are to be expected.

Economic data from Australia has been mixed, which suggests that Governor Stevens might give another cautious statement. Business and consumer confidence have both improved recently, as shown by the surveys conducted by NAB and Westpac, yet hiring in July has fallen short of expectations with its negative reading. Private capital expenditure has chalked up a stronger than expected 1.1% rebound in the previous quarter but company operating profits have printed a massive 6.9% decline in the same period. Inflation has more or less been stable but there’s still a good chance that Stevens could talk about the historically overvalued Australian dollar and its negative economic effects.

Bank of Canada (Wed, 3:00 pm GMT)

Next up is BOC Governor Poloz and his gang of policymakers who are scheduled to make their rate decision on Wednesday. They are also expected to keep rates unchanged at 1.00% for now and stick to their neutral monetary policy stance.

While the latest retail sales and GDP reports from Canada have been impressive, with the economy showing a 0.3% monthly growth figure for June and an upward revision for its May GDP reading, inflation reports have been showing signs of weakness. Its core CPI for July showed another 0.1% decline in price levels while the headline figure showed a 0.2% drop. Leading inflation indicators, such as the raw materials price index and the industrial product price index, printed negative readings as well.

Bank of Japan (Thurs, 5:30 am GMT)

Among the monetary policy statements scheduled this week, the BOJ announcement could prove to be one of the most exciting ones. After all, expectations are running high for BOJ Governor Kuroda and his men to admit that the Japanese economy is in a rut.

In my economic data roundup for Japan last week, I mentioned that there are a few signs that the BOJ could add stimulus sooner or later. Weak economic figures from Japan and the standstill in inflation suggest that the economy hasn’t quite recovered from the negative impact of the April sales tax hike. Even the economic research staff at the BOJ have mentioned that the Japanese economy could be in for a deeper slowdown if the central bank doesn’t act soon!

However, given how BOJ officials have been reiterating that the economy could stay resilient and that a strong rebound will happen, it is likely that Kuroda will sit on his hands for now and refrain from pulling the trigger on more quantitative easing.

Bank of England (Thurs, 12:00 pm GMT)

After the BOJ policy statement on Thursday, BOE Governor Mark Carney will take his turn on the podium and announce the MPC’s rate decision. While the previous BOE meeting minutes indicated that a couple of policymakers voted to hike interest rates in July, monetary policy is still widely expected to stay put for now.

Governor Carney might highlight the recent downturn in U.K. inflation, as both core and headline CPI figures have indicated falling price levels recently. Retail sales have also fallen short of expectations in July, although forward-looking data such as CBI realized sales and GfK consumer confidence have hinted at a potential rebound. Manufacturing, construction, and services PMIs up for release this week could also provide more clues on whether or not an upbeat economic assessment is likely.

Bear in mind though that, unless actual monetary policy adjustments are made or significant changes in the BOE statement are seen, the British pound might continue to sit tight and just wait for the minutes of the BOE meeting to be released.

European Central Bank (Thurs, 12:45 pm GMT)

Another potential market-mover among the central bank announcements this week is the ECB policy statement. Recall that Governor Mario Draghi dropped a few dovish hints during the recent Jackson Hole Summit, upping the odds of further ECB easing sooner or later.

Data from the euro zone has been mostly disappointing as usual, with Germany reporting much weaker than expected retail sales and employment figures for July. Inflation in the euro zone’s largest economy has stayed flat while Spain, the region’s third largest economy, reported a 0.5% decline in price levels. Overall, inflation expectations for the euro zone have been unchanged at 0.3% for the headline figure and have been upgraded from 0.8% to 0.9% for the core figure.

With that, Draghi is likely to zoom in on the downturn in Germany and the threat of deflation – both of which could draw more euro bears in the forex arena. Bear in mind that the ECB is already scheduled to dole out additional targeted long-term refinancing operations this month, yet the possibility of hearing about more easing plans from Draghi is still on the table.