BoJ, Fed and Earnings to Dominate This Week

It’s been a relatively quiet start to the week in the markets but this should pick up quite considerably with a couple of big central bank decisions to come and more than a third of S&P 500 companies reporting second quarter earnings.

The stand out central bank decision is the Bank of Japan, with high expectations in the markets that a new round of monetary stimulus will be launched. It was thought that the BoJ was exploring the idea of helicopter money, something that was firmly denied in an interview with Governor Haruhiko Kuroda last week, which took the edge off the yen weakness from the last couple of weeks. This was partially undone by the revelation that the interview was conducted in June, although it’s unlikely that his view has changed significantly since then.

Still, the BoJ has a number of avenues open to it, as we’ve seen with the ECB which has explored a number of options when it comes to providing additional monetary support. Given the reaction to negative interest rates previously, it will be interesting to see whether the central bank will risk going further into negative territory or opt for more asset purchases, perhaps widening the assets available for inclusion under the program. This is all assuming the BoJ does in fact opt to loosen monetary policy this month, something the BoE and ECB have already opted against due to a lack of data following Brexit.

The Fed on the other hand is extremely likely to stand pat this month, most likely citing Brexit and the lack of data as the reason for doing so. The U.S. economy has continued to perform well and the labour market bounced back strongly in June which may lead the Fed to reaffirm its intention to raise interest rates this year, while highlighting the number of downside risks to their forecasts.

Today is looking a little quieter though from a news flow perspective. The German IFO business climate number was better than expected and may be lifting sentiment in Europe so far. The U.S. session will be dominated by earnings, although only eight S&P 500 companies are due to report today.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam

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