Top Things to Watch this Week

in these past weeks the main events are all related with Central Banks' decisions in starting an interest rate cut cycle. The Fed is expected to be the first, but still the continued signs of a resilient economy can delay such decision.

Presently, markets are anticipating approximately three quarter-point rate reductions through year’s end, starting in June. Any suggestion that interest rate cuts can be fewer than those that are currently priced in, will push yields higher, bolstering once again the USD (U.S. Dollar).

March 18th

Euro Area: CPI YoY Final (Feb)

Christine Lagarde has already stated that the ECB is not prepared to consider an interest rate cut in the upcoming months.

The inflation final report can delivered a slightly higher number for February final CPI, but any volatility in the markets will be driven mostly by speculations and emotions since this number makes no difference on ECB monetary policy decisions for the quarter.

March 19th

Japan: BoJ (Bank of Japan) interest rate decision

This is a MAJOR event.

Last week, Rengo - Japan’s largest trade union group, representing over seven million workers - announced a wage agreement for a 5.28% rase, the largest increase in the last 30 years.

BoJ mentioned the precondition for a rate hike would be a "virtuous wage-price cycle". With inflation above 2% for over a year, conditions seem to be aligned for the BoJ to change is monetary policy towards a positive interest rates cycle. Such decision will certainly impact the JPY (Japanese Yen) and the the Nikkei (short for Japan's Nikkei 225 Stock Average - JP225), the leading and most-respected index of Japanese stocks.

Australia: RBA (Reserve Bank of Australia) interest rate decision

This is a high adrenaline week for forex traders.

Australia's central bank is expected to keep its key interest rate at 4.35%, at least until end-September. However, the AUD (Australian Dollar) and the S&P/ASX 200 Index (the benchmark institutional investable stock market index in Australia, comprising the 200 largest stocks) can show some volatility related with the USD and the JPY probable fluctuation along the week.

Australia is abundant in natural resources and commodities prices (specially metals) have a huge impact over the AUD. On the other hand, given its geography, Australia trading partners are mainly located in Asia, thus the AUD is very sensible to the economic outlook both in China and Japan.

March 20th

US: FED (Federal Reserve) interest rate decision

Earlier this month, markets got over excited as Fed Chair Jerome Powell declared before Congress that an interest rate cut was already on the radar.

As a consequence, Gold and Cryptocurrencies prices benefited from an outstanding bullish momentum, suddenly broken by disappointing consumer price data that suggested upside inflation risks.

Although no interest rate cut will be announced on Wednesday, investors and traders will be looking for some guidance and forecasts as a reaction to new information brought by macroeconomic data. Once again, although technical analysis is key for investment decisions, trading is every time more dependant on data and the ability to interpret indicators.

March 21st

UK: BoE (Bank of England) interest rate decision

UK is facing an upside inflation risk, so traders should not be surprised if the central bank starts to adopt a more hawkish posture. This means there will be fewer rate cuts than initially anticipated.

The GBP (British Pound) hit a seven-month highs against the USD in earlier March, and last week benefited greatly with the surprise increase in US producer prices.

UK February inflation data will be published a day before the BoE decision. Headline inflation is expected to have decreased, cementing a clear downtrend, but markets don't expect the BoE to decide any interest rate cut before the Fed.