This was a big week for central banks with the Fed, ECB, and BoJ all meeting. The Fed hiked by 25bps point as markets were expecting, but Powell kept the possibility of a September rate hike an open question that can only be answered by incoming data. The ECB had to deal with a slew of weak PMIs to start the week, but it too hiked interest rates by 25 bps but recognised the economic outlook was deteriorating. At the time of writing, the BoJ has not met, but markets are speculating whether or not it will signal the end of its Yield Curve Control policy.
Other key events from the past week
- USD: Fed stresses data dependence, July 26: Going into this week’s Fed meeting we anticipated that June’s US CPI print could turn the Fed to a more data-dependent stance. Watch incoming inflation and jobs data closely now.
- EUR: ECB watch, July 17: The ECB hiked by 25bps as expected and it tweaked language slightly with some analysts reading this as keeping a September hike as an ‘option’. Eurozone core inflation data will be key next week for the Euro.
- JPY: BoJ meeting, July 28: Speculation was once again swirling around the BoJ meeting that the bank would abandon its Yield Curve Control policy. At the time of writing, the decision has not been made, but any change in policy will leave the GBPJPY vulnerable to seasonal downside.
Key events for the coming week
- EUR: Inflation data, July 31: June’s headline and core inflation print was 5.5% y/y for Europe. Will there be a drop lower next week? Or will high inflation keep pressure on the ECB to keep hiking rates even as growth slows?
- Seasonal Insights: Is there still time for GBPJPY falls in with the BoE meeting on Thursday?
- AUD: RBA rate decision Aug 1: The RBA was more cautious in July on signaling an end to its rate hiking cycle due to persistent inflation. Headline and core inflation fell more than forecast this week with the core at 5.9% vs 6% forecast and the headline at 6% vs 6.2% forecast. Will the RBA not hike now?
