There are monetary policy meetings in several important central banks this week, but also we are heading toward very important macroeconomic releases.
On Tuesday, Reserve Bank of Australia will publish its decision regarding monetary policy. Our view is similar to the one of Nomura analysts. They think, that RBA will keep on with neutral stance. Policy Board may emphasize the discomfort from historically high AUD rate but also they may express view, that further rate cuts are not a solution to actual issues. We think that they may address latest pickup in unemployment rate and that would be the most interesting part of tomorrow’s statement.
On Wednesday, Bank of Canada will publish its statement declaring future shape of monetary policy. We think that they will stay neutral and whole meeting will be a non-event for market participants.
Federal Reserve will publish Beige Book on Wednesday evening. Beige Book will show how Fed perceive economic situations in all districts providing good insight into Fed’s views. We expect that BB will confirm good recovery in manufacturing activity and employment pace.
Bank of Japan will come with monetary policy statement on Thursday. We share view of many analysts, who say that BoJ will continue its passive stance as during several last meetings.
Main event of the week will be European Central Bank meeting on Thursday paired with Bank of England mon. pol. statement. We think that BoE statement will be another non-event but Mark Carney may speak of some spicy comments as he did couple times before. Watch out for a choppy Pound that day. ECB will be the most interesting part as macro data from EMU keeps to deteriorate despite rate cuts in June. Some analysts think that ECB may push stimulus further and speculate about possible Quantitative Easing program, i.e. ABS purchases. However, our view is opposite and we think that QE prophets may be disappointed as ECB was in opposition to a balance sheet expansion in form of direct QE. They always did it in sterilized way like OMT or LTRO. Also, they may still want to wait and observe results of TLTRO and rate June rate cuts.
Friday is very important for Dollar. At first several FOMC voting members will give their speeches and their comments may be very valuable for Fed observers, as QE end is closer and closer. Also, Bureau of Labor Statistics will publish its employment situation report with headline readings: Non-Farm Payrolls and Unemployment Rate. We expect these readings to stay in line with averages showing robust improvement in labor market condition. Still the greatest concern is weak wage growth.