Asian markets look set to start the week in the red as the US indices had a poor day on Friday with the tech stocks in particular looking weak and the Nasdaq finished down 1.46%. The dollar also weakened and treasuries pushed higher after a miss on the GDP data release. The print was only a slight miss and the numbers are in line to keep the Fed on it’s path for two further rates hikes this year. The US administrations PR team were out in full force over the weekend to push the good news out to the American public that growth is still going strong and they have the President to thank for it.
It’s a huge week ahead for financial markets this week with three major central bank meetings and a plethora of tier 1 data due. For a change the Fed is probably of least interest to investors of the three with no hike expected. However, there will be a massive focus on both the BoJ and BoE as the week progresses, talk of a tweaking of BoJ policy has preceded this meeting and we’ve seen big moves across the market in anticipation of this. Investors will be looking for any change in EFT purchasing policy, yield curve strategy and in the general message from Governor Kuroda. We’ve seen a strong appreciation in the Jpy over the last week or so and expect this trend to continue if we do see an adjustment to the banks ultra-loose policy, although some investors will be wary of a ‘sell the fact’ scenario if expectations are not met.
In the UK, the Bank of England is widely expected to raise rates this week despite some weak data recently and some less than positive comments from some members of the MPC as well as the ever present Brexit risk. The risk is firmly with the downside for the sterling if we don’t get the expected hike but Bulls should get some results as if they come out and increase the rate to 0.75%. Investors will then look to the voting structure of the decision and this could add to market volatility over the event.
Today promises to be the calm before the storm of risk events with little in the way of tier 1 data or large risk events to move the markets. As usual, investors will keep a close eye on the news wires with particular focus on the upcoming central bank announcements and the now usual Trade issues, however expect range bound conditions to continue for the first couple of trading sessions at least.