Key Events In The Coming Week: The Summer Doldrums Arrive

With little on the US economic docket in the coming days as the summer doldrums arrive, with Citi saying that “though several events of note linger on the horizon for later this week, G10 is firmly on the beach as of this morning”, this week’s focus is on the ECB and BoJ meeting along with minutes from the RBA and the Riksbank. Also important are inflation releases from the UK, New Zealand and Canada along with several China data prints. In EM, there are monetary policy meetings in Indonesia, South Africa, Hungary, Kazakhstan and Hong Kong.

Here are the key events to look, courtesy of Bank of America, for a macro preview of this week’s events and how they may impact currencies see “FX Week Ahead Preview: Is it “End Of Days” For The Greenback”:

Central banks take centre-stage: watch the ECB and BoJ:

BofA believes that after the “Sintra hiccup”, the ECB for next week has to choose between “backtracking” and “assuming”. They think the ECB will choose the latter, and toughen its language marginally, by removing the easing bias on QE, while insisting on the need for prudence and a “persistent” monetary stimulus. Looking ahead, we think the ECB may wait for the Fed’s decision in September before making a move and wait until October before revealing the quantum of QE buying in 2018.

At its 20 July meeting, the BoJ policy board is expected to keep its short rate unchanged at -0.1% and keep its guidance on QE unchanged. The weakness in YTD inflation means the BoJ board will likely cut its FY17 core CPI forecasts. But with other indicators pointing to a gradual acceleration in growth and prices, the board has little incentive to change policy, and will likely stick to its optimistic FY18/19 projections.

…along with minutes from the RBA and the Riksbank

That RBA is expected to likely downplay recent signs of rising prices given the expected tempering effect of supervisory measures on housing activity. Currency strength also argues against a shift to more hawkish tone at this stage. The Riksbank removed their easing bias at the July 4th meeting in a unanimous decision but nevertheless emphasized their dovish tilt and sensitivity to the ECB. It will be interesting to see the thought process of the various members in the Minutes.