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Central Banks to Drive Currency Markets This Week
Confirmed
In Short: This week, central bank decisions and economic data will dominate currency markets, with key events in the US, UK, Japan, and Canada.
Central bank decisions are the major highlight of the week, with the Federal Reserve, Bank of England, and Bank of Japan set to announce their monetary policy decisions.
Apart from the central bank events, CAD will once again be in the spotlight as Canada’s inflation report is scheduled for Monday.
ING’s Frantisek Taborsky highlights a busy CEE data and policy calendar, with Hungary’s inflation seen edging up, the National Bank of Poland and Central Bank of Turkey expected on hold, and Romania’s inflation falling sharply on base effects.
Following the governor’s dovish remarks in July, inflation has risen over the past two months, effectively closing the door to a near-term rate move. On Thursday, the Central Bank of Turkey is also likely to hold rates at 37%.
Bank of Japan board member Kazuyuki Masu said the BOJ is expected to keep raising rates, flagging oil, food, producer price, and yen-driven inflation risks ahead of the central bank's September 17 to 18 policy meeting.
Traders should read this as the central bank applying the brakes rather than attempting to reverse the broader trend, since the yuan has still risen a meaningful amount against the dollar this year.
Should market pressure push the currency toward either edge of that band, the central bank can step in to smooth volatility, whether through direct buying or selling of yuan, adjustments to liquidity conditions, or guidance channelled through state-owned banks.
What's confirmed
- Central bank decisions are the major highlight of the week, with the Federal Reserve, Bank of England, and Bank of Japan set to announce their monetary policy decisions.
- Apart from the central bank events, CAD will once again be in the spotlight as Canada’s inflation report is scheduled for Monday.
- ING’s Frantisek Taborsky highlights a busy CEE data and policy calendar, with Hungary’s inflation seen edging up, the National Bank of Poland and Central Bank of Turkey expected on hold, and Romania’s inflation falling sharply on base effects.
- Following the governor’s dovish remarks in July, inflation has risen over the past two months, effectively closing the door to a near-term rate move. On Thursday, the Central Bank of Turkey is also likely to hold rates at 37%.
- Bank of Japan board member Kazuyuki Masu said the BOJ is expected to keep raising rates, flagging oil, food, producer price, and yen-driven inflation risks ahead of the central bank's September 17 to 18 policy meeting.
- Traders should read this as the central bank applying the brakes rather than attempting to reverse the broader trend, since the yuan has still risen a meaningful amount against the dollar this year.
- Should market pressure push the currency toward either edge of that band, the central bank can step in to smooth volatility, whether through direct buying or selling of yuan, adjustments to liquidity conditions, or guidance channelled through state-owned banks.
What's still developing
- The market’s focus will be on forward guidance and clues about further increases.
- China operates a managed floating exchange rate system, under which the yuan is allowed to trade within a band of plus or minus 2% around the central midpoint set each trading day.