Central Banks are top of the agenda this week as a heavy batch of key economic data hits the markets. Will the Bank of Japan, the Federal Reserve and the Bank of England tweak monetary policy? We consider the outlook of these decisions on the outlook for forex, equities and commodities.
Donald Trump will be shouting off about a 4% print on GDP, which at 4.1% is the best growth since Q3 2014 (there was also an upward revision to Q1 to 2.2%). It certainly seems that a big jump in soybeans export has helped the strong number (apparently contributed over +1.0%), and the prospect of inventory stocking being a driving force behind the growth numbers is a one-off factor as it pulls growth forward from the future. Does this potentially give rise to a disappointing Q3 growth (which is apparently just before the US mid-terms)? Treasury yields falling after the release suggests traders are reticent. Looking ahead, it may be into the holiday season, but any traders still chained to their desks will find that this week is absolutely packed to the rafters with tier one data. Although watching paint dry may have been preferable to last Thursday’s ECB policy announcement, the other G4 central bank announcements may be somewhat more eye catching. Could we see some interesting moves from the Bank of Japan (BoJ) and the Bank of England (BoE)? Speculation of the BoJ tweaking its yield curve control has helped to drive yen outperformance. This is in contrast to the disappointing sterling performance which comes despite expectation of an August hike being over 80%. The slightly lower inflation component in the US GDP numbers on Friday suggests little pressure on the Fed to be more aggressive and little need to get too worked up over the FOMC this week. However, any upside surprise in average hourly earnings, above 2.8% would be interesting.
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