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The Week Ahead in FX Markets – Central Banks in Focus

Published January 20, 2020

It’s a busy week ahead in markets on the economic calendar with Monetary Policy in focus with the BOJ, BOC and the ECB all making rate decisions this week.

Central Banks

The Bank of Japan (BOJ) will meet on Tuesday, followed by the Bank of Canada (BOC) on Wednesday and lastly the European Central Bank (ECB) on Thursday, with all key central banks expected to hold rates. Focus will largely be on the ECB meeting, which will launch its first strategy review since 2003 to reassess an inflation target that has not been reached in seven years. ECB’s new President Christine Lagarde is also due to speak tonight and Friday.

In the US, it will be a quiet week ahead on the data front for the USD, with markets closed on Monday for the Martin Luther King Jr. Day holiday. The first data release is due out on Wednesday with December’s existing home sales figures, which is not expected to have much of an impact on the US dollar. Thursday, we see the release of the weekly jobless claims figures and focus will largely be on Friday’s private sector PMI numbers for January, with the service sector expected to have the biggest impact.

In New Zealand, we have the fortnightly NZ dairy auctions on Tuesday night, with the key event on Friday’s fourth-quarter inflation rate with an uptick in the annualized forecast at 1.8% up from the prior 1.5%. The report will be closely watched by the RBNZ, ahead of their next monetary policy meeting held on February 12.

In Australia, consumer confidence is due on Wednesday, followed by employment figures on Thursday, with the unemployment rate in December expected to remain unchanged at 5.2% and 11k new jobs forecasted. A weak reading in employment data will add further support for the Reserve Bank of Australia (RBA) to cut interest rates when they meet next month.

Friday Finishes the Week with “Flash PMIs”

On Friday, we see the release of “flash PMIs” in many countries – advance readings of purchasing managers’ business activity indexes. British PMIs will be in focus, as this is the last key data released ahead of the Bank of England’s (BOE) rate decision on 30th January. Markets recently increased the chances of a BOE rate cut to 73% up from 60% before the disappointing UK retail sales data released last week. The Australian, Euro zone and US figures will also be closely watched on Friday.

Outside of data, Geopolitical events will remain in focus, with Trumps impeachment trial expected to be in full swing this week. In Brexit, there is only 11 days remaining until Britain is due to leave the EU on 31st January. Markets now await details on when phase 2 trade talks will begin, following the signing of the phase 1 trade deal. Markets will also keep an eye on the World Economic Forum 2020 annual meeting that takes place in Davos this week.

Rees Logan, Adam Nikitins and Stewart McCallum were appointed Joint and Several Voluntary Administrators of EncoreFX (NZ) Limited on 30 March 2020. Adam Nikitins and Stewart McCallum were appointed Joint and Several Voluntary Administrators of EncoreFX (Australia) Pty Ltd on 30 March 2020. Any queries regarding the Administrations should be directed to