Markets Gear Up for a Heavy Data Week

At the centre of things this week are rate announcements coming out from several major central banks in the world –

1. U.S. Federal Reserve FOMC Meeting

2. Bank of England (BoE)

3. Bank of Japan (BoJ)

Why does it matter, you may ask? Here is everything you need to know.

1. FOMC Meeting

The Federal Open Market Committee (FOMC) is set to kick off its monthly meeting tomorrow, March 19th extending to March 20th.

The famous question that’s been keeping everyone on their toes lately: rate cuts or no cuts?

As previously reported by BitDelta, the Federal Reserve will not budge for a rate cut this meeting.

While the market predicts only a small chance of a rate cut fuelled by Powell’s less strict tone and remarks, overall sentiment is expecting the Fed to keep rates steady for a consecutive meeting at a range of 5.25% to 5.50%.

Fed Rate Cuts Timeline Still Unclear

The U.S. economy has been on its road to recovery, and doing much better, even if inflation is still sticking around.

• In February, both consumer and producer prices were higher than expected.

• The Fed will be focusing on this data for any statement and future projections.

It is important to note that the Fed had already hinted at reducing rates three times this year, and four times in 2025 to reach its inflation target of 2%.

However, it now remains unclear whether this forecast will be changed based on recent data.

Overall, we could say that the Fed is still sticking to their initial plan, but policymakers will certainly be keeping an eye out on more proof that inflation is moving toward its target before proceeding to make any changes.

How does this matter to you?

• If this happens, the U.S. dollar might weaken.

• Also of relevance, ahead of the event, the US Dollar Index is seen nearing the underside of daily resistance at 103.62, a level complemented by the 200- and 50-day simple moving averages (SMA) at 103.69 and 103.55, respectively.

2. Bank of England (BoE)

Similar to the Fed, the Bank of England is poised to keep interest rates steady this week.

• Their meeting is set for Thursday 12:00pm GMT.

• Interest rates are likely to stay at 5.25% for a fifth consecutive meeting.

• Market sentiment is still anticipating a rate cut sometime around August, with the possibility of one in September due to recent changes in expectations.

Recent data has shown that the UK economy grew by 0.2% in January, just as forecasted. This suggests that the country as a whole is slowly moving out of recession, which is good news for the government.

• Inflation in January kept steady at 4.0% YoY for overall prices and 5.1% for core prices – slightly below expectations.

• However, February’s inflation figures are due on Wednesday and are expected to show a slowdown to 3.6% for overall prices and 4.6% for core prices.

• Unemployment has slowly risen, but wage growth remains high.

Investors will be closely monitoring these events, especially any potential surprises in the inflation numbers.

• If inflation were to miss expectations, there may be more bets against the pound (GBP).

• Any unexpected positive news could lead to a change in policy forecasts.

Good to Know: Central Banks and Markets: Domino Effect?

3. Bank of Japan (BoJ)

Speculation has been going around claiming that the Bank of Japan might raise its policy rate this week, following significant wage increases.

The BoJ is scheduled to announce its decision on Tuesday, March 19th around 3:00am GMT.

Recommended Read: Is Japan Negative Interest Rate Policy Nearing its End?

Market expectations are split, with a 50/50 chance of the central bank putting an end to its negative interest rate policy.

If we witness a 10 basis point rate hike – moving from -0.1% to 0.0% – this would make it Japan’s first hike since 2007.

• A rate hike could lead to higher Japanese Government Bond (JGB) yields and, in turn, strengthen the Japanese Yen (JPY).

• Now if a hike does not happen, traders will watch for any hints of a future change in April, which could still boost demand for JPY.

We will also be paying close attention to inflation numbers from both Canada and the UK, alongside PMI data for the euro area, the UK and U.S.