This week might be the most anticipated in the Central Bank policy calendar as the Bank of Japan and Federal Reserve Bank meet on the same day. The interesting part is that one is moving towards further rate hikes and another is about to start or at least indicate rate cuts. The reason for both is the same and that is inflation, for one it is heating up and for another, it is cooling off.
Bank of Japan will likely announce a reduction in bond buying by providing a specific limit. In addition as inflation remains high the probability of a rate hike does stay on the table. However, a slowing economy and some troubled bank books might lead to a delay.
Federal Reserve Bank on the other hand might provide further indication on the rate cut. There is some speculation that the official wording relating to inflation can become dovish before the start of the cut in September as the Fed rate swap markets expect.
Both events would keep markets in every asset class on toes especially USDJPY, US 10yr Bond yield and S&P 500 VIX. All three of these markets are at crucial levels that might result in quick responses to policy movements.
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