The week ahead holds multiple interest rate decisions and closely watched inflation figures. Markets will be buzzing with news of Australian and Japanese interest rates on Tuesday, the Fed's decision next Wednesday, and the BOE's interest rate decision on Thursday.
Monday
CPI growth in Europe will be published at 14:00 GMT+4 (Dubai Time), expected to have decelerated at 2.6% YoY in February compared to a previous reading of 2.8%.
Tuesday
The Reserve Bank of Australia will release its interest rate decision at 07:30 GMT+4 (Dubai Time), expected to remain at 4.35%. If the reading comes in higher than expected, analysts suggest this to be generally positive for the currency and vice versa.
The Bank of Japan will release its interest rate decision at 18:48 GMT+4 (Dubai Time). The central bank is expected to raise rates by 10 basis points, exiting its negative interest rate territory to become 0% for the first time since 2016. Should the BOJ keep rates as is against expectations, this could weaken the JPY, according to analysts. However, if the decision follows expectations, analysts suggest the impact may be insignificant as the market has already priced this in.
Wednesday
UK CPI growth is scheduled for publication at 11:00 GMT+4 (Dubai Time). The inflation figure is expected to have decelerated to 3.5% YoY in Feb, compared to a previous figure of 4%. A real reading in line with expectations would show inflation heading closer to the central bank's target of 2%, acting as a strong indicator of the BOE's next move.
The Fed is set to release its interest rate decision at 22:00 GMT+4 (Dubai Time), expected to keep rates at 5.5%. This is considering the hotter-than-expected CPI and PPI readings last week that showed persistent inflation dynamics. If the decision turns out higher than expected, analysts indicate this is generally positive for the currency and negative for gold, as the opportunity cost of holding the precious metal increases. However, with expectations of rate cuts during the second half of the year, we could see investors holding onto the safe haven.
Fed funds futures expect less than three total rate cuts for 2024, the lowest since October and less than the Fed's expectations in December. This suggests that if the Fed keeps its median member forecast unchanged at three cuts this year, markets will regard this as dovish, leading to a potentially stronger EUR/USD after the FOMC decision.
Thursday
The Bank of England is scheduled to release its interest rate decision at 16:00 GMT+4 (Dubai Time). Interest rates are expected to stay at 5.25%, especially since inflation is still sticky, similar to that of the United States. Analysts suggest a higher-than-expected reading is generally positive for the currency and vice versa.
The U.S. will also release data on the labor market. Initial jobless claims are due at 16:30 GMT+4 (Dubai Time) and are expected to have increased to 214K compared to a previous 209K. As analysts suggest, a higher-than-expected reading is generally negative for the dollar and vice versa.
S&P Global US Manufacturing and Services PMI will be released at 17:45 GMT+4 (Dubai Time). The data is expected to decline from 52.2 to 51.8 and 52 compared to 52.3. A better-than-expected reading is generally bullish for the dollar, while a weaker-than-forecast reading is typically bearish, according to analysts.
In conclusion, investors should closely watch the market this week to make smarter and better decisions during times of high volatility.
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