Three major central banks set for rate decisions this week
investmentnews.comInvestors begin the week desperate for answers to questions about the near-term path of global monetary policy after conflicting signals from key economies upended markets.
Major central banks are set to meet in Tokyo and Washington on Wednesday and London on Thursday, with traders struggling to decide if the Bank of Japan will hike interest rates and then when and by how much the Federal Reserve and Bank of England will cut them.
At stake are recent surges in the yen and pound, as well as the decline of short-term US Treasury yields. Multiple markets ended last week looking jittery due to the uncertain outlooks for policy and economic growth.
“This week will be more interesting,” said Wong Kok Hoong, the head of institutional equities sales trading at Maybank Securities Pte. in Singapore. “And maybe more tiring.”
Here’s a guide for traders to this week’s central bank action:
There’s uncertainty in markets about what the Bank of Japan will do after years in which it rarely touched rates.
Governor Kazuo Ueda is setting a personal record for a lack of public comments before a policy meeting, and the latest economic data has shown inflation accelerating but consumer spending disappointing.
The assumption that further policy tightening is possible sent the yen racing higher last week. The currency has strengthened by about 5% against the dollar since July 11, helped in part by suspected intervention as authorities tired of currency weakness.
Underscoring the uncertainty, option trader bets on a rate hike lurched from below 40% to nearly 90% last week before settling about somewhere in between. Economists were equally uncertain with just 30% forecasting an increase, but more than 90% seeing one as a risk, according to the
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