Market slows before major central bank meetings

Market has experienced a notably quiet session today, a typical occurrence for a Monday with an exceptionally light economic calendar. However, significant market activity is expected later in the week, driven by a series of high-impact events.

Three central bank meetings are set to take place, potentially leading to a rate hike, a hold, and a cut. Additionally, crucial economic data releases, including CPI figures from the Eurozone, Switzerland, and Australia, GDP data from the Eurozone and Canada, and the highly anticipated US non-farm payroll data, are on the docket.

Central banks in focus

Fed meeting

The Federal Open Market Committee (FOMC) meeting is anticipated to keep interest rates steady at 5.25-5.50%. Market participants will closely watch forward-looking statements, as the Federal Reserve hints that monetary policy may soon ease, potentially setting the stage for a rate cut in the September meeting. While fed fund futures indicate a 64% probability of consecutive rate cuts in November and December, Chair Jerome Powell is unlikely to provide explicit guidance this time, likely deferring to upcoming economic projections and dot plots in September.

BoJ's tough decision

The Bank of Japan (BoJ) faces a challenging decision on whether to implement a second rate hike. While deferring the decision to September or October remains possible, this meeting is considered a “close call.” However, it is more certain that the BoJ will outline plans to taper its bond purchases, potentially halving them in the coming years, fulfilling commitments made at the previous meeting.

BoE's uncertainty

The Bank of England (BoE) also faces significant scrutiny, with some market participants expecting a rate cut from 5.25% to 5.00%. A recent Reuters poll shows a shift in sentiment, with 49 out of 60 economists surveyed anticipating the rate cut, reflecting growing uncertainty. The BoE’s history of surprising votes adds an element of unpredictability. Recent comments from BoE officials have not suggested a consensus for a cut at this meeting. Besides the rate decision, the BoE will release new economic projections for markets to assess future monetary policy paths.