Highlights of the coming week
Last week, the Bank of Canada was able to surprise the market with an unexpected decision to reduce the volume of the asset buyback program and a statement about a possible interest rate increase in 2022.
The ECB continues to adhere to a more conservative plan and is not in a hurry with changes in monetary policy. The regulator allows adjustments to the PEPP program in the future, but is not yet ready to discuss the issue of tightening monetary policy.
Next week, the market is waiting for meetings of the Fed and the Bank of Japan. Investors are betting that regulators will leave the main parameters of monetary policy unchanged and will adhere to a soft tone of statements. This could lead to a further weakening of the dollar, which is now in the region of a 3-week low.
Japan - Bank of Japan Meeting
For a long time, the Bank of Japan has been implementing a super-soft monetary policy. Against the background of the deterioration of the epidemiological situation in certain prefectures of Japan, the regulator is likely to maintain the key parameters of monetary policy unchanged. One should not rule out hints of further easing of monetary policy in the event of a deterioration in the economic situation in the country. Such signals can increase pressure on the national currency.
USA - Fed meeting
In early April, the Federal Reserve conducted massive verbal interventions to bring down speculation about a possible tightening of monetary policy in the event of increased inflationary pressure. The market heard signals from the Central Bank. The yield on 10-year bonds fell from 1.7% to 1.55%, and the dollar index fell to around 3-week trading lows.
Most investors bet that on Wednesday the regulator will adhere to the plan and signal its determination to continue implementing a soft monetary policy. The soft tone of the Fed's statements may increase pressure on the US currency.
US - First Quarter GDP Estimate Data
In Q1, the US economy showed good signs of recovery. Despite the restraining effect of the pandemic, economic activity grew, and the situation in the labor market stabilized. Against this background, experts predict quarterly US GDP growth of 5.7%, compared to 4.3% in the 4th quarter of 2020. Stronger GDP data can provide substantial support to the dollar. Strong data on the labor market and inflation, combined with high economic recovery rates, will increase pressure on the Fed to tighten monetary policy.