Weekly Outlook, June 17-21: ECB, BOE, BOJ & FED in Highlights

Posted Sunday, June 16, 2019 by
Arslan Butt • 3 min read

The week ahead is likely to present some clarification for investors on three aspects that have been a cause of uncertainty. On Friday, the dollar index soared to its highest level in a week after boosting retail sales data for May raised concerns that the US economy is slowing sharply. This came ahead of the Federal Reserve’s meeting in the coming week, which is why the Fed rate decision is getting more attention, as the series of weaker economic events could have impacted the Fed policy stance.

Looking ahead to this week’s economic calendar, fundamentals are all about the monetary policy statements and decisions from global economies. Let’s look at them.

Watchlist – Key Economic Events This Week

Monday – June 17

ECB President Draghi Speaks – 17:00 GMT
On Monday, the European Central Bank President Mario Draghi is due to deliver opening remarks at the ECB Forum on Central Banking, in Portugal. Direct remarks on future monetary policy decision are not likely to happen, which is why the event may go muted.

Tuesday – June 18

Monetary Policy Meeting Minutes – 1:30 GMT
For all the freshers, it’s a detailed record of the RBA Reserve Bank Board’s most recent meeting, providing in-depth insights into the economic conditions that influenced their decision on where to set interest rates.

Last week, the Reserve Bank of Australia, as widely expected, decreased its interest rate by 25 bp to 1.25% from 1.50%. In this month’s Monetary Policy Meeting Minutes, the critical subject is likely to be whether or not the RBA will represent a dovish enough stance to justify the nearly 75bp of cuts priced in the next 12 months.

We can also put this in another way – will the RBA deliver a neutral cut that may relief rally in the Aussie or a dovish cut, suggesting a July rate cut follow up?

Wednesday – June 19

Fed Monetary Policy Meeting – 18:00 GMT
This week, all eyes remain on the Federal Reserve and the Interest Rate decision. The Fed will be the first of the three central banks to offer its policy statement this week and is anticipated to hold the fed funds rate unchanged at the target range of 2.25-2.50%.

Investors are convinced that a rate cut at the following meeting in July is a certain decision, and traders are more interested in forward guidance. Traders could be disappointed if the Fed falls short of giving apparent signs of lowering borrowing costs.

FOMC Statement
The FOMC statement is likely to acknowledge the slowing of jobs growth, which is still enough to keep the interest rate unchanged. Previously, the Fed maintained that the weaker inflation numbers were transitory. It may be too early to drop such views; the confidence in the assertion may have weakened.

Thursday – June 20

BOJ Monetary Policy Meeting – Tentative
The Bank of Japan will publish its monetary policy just a few hours after the Federal Reserve on Thursday. Unlike in the US, where interest rates are adequately above 0%, the BoJ has inadequate capacity to cut rates even though it may need to as Japanese exports have undergone a big blow from Trump’s trade war and inflation is still nowhere near the 2% target.

Therefore, the Bank of Japan is widely expected to keep interest rates unchanged, but it may signal a dovish stance to maintain the currency weaker, to accommodate exporters. A weaker Japanese yen helps exporters get more funds when they convert USD into JPY.

BOE Monetary Policy Meeting – 11:00 GMT
This week, the Bank of England will be the last of the central bank meetings, publishing its policy decision after the Bank of Japan. However, ahead of that, UK figures will draw investor’s attention amid mounting anxieties that the UK economy has started getting hit by the chaos and uncertainty caused by Brexit.

Despite weaker growth and rising Brexit concerns, the BOE is very much likely to stick to a 0.75% interest rate. Moreover, the policy summary is expected to suggest that some tightening in monetary policy will be needed over the next 2-3 years.

With no press conference or quarterly forecasts scheduled for the June meeting, the BOE is widely anticipated to repeat the same message in its statement.

Good luck, and have a lovely weekend!

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