The week ahead could be pivotal to the financial market landscape for the rest of the year, as the G3 central banks deliver their latest policy decisions and China’s Politburo of the ruling Communist Party meets to discuss the economy.
The U.S. Federal Reserve, European Central Bank and Bank of Japan decisions and press conferences all come over the Wednesday-Friday 48-hour period, and China’s Politburo is expected to begin its meet on Friday.
If that wasn’t enough, purchasing managers index figures will give the first indications on how economies performed in July. The U.S. earnings season moves up a gear with Meta Platforms, Microsoft and Alphabet among the big names reporting.
Dovish signals from Fed Chair Jerome Powell would probably boost risk appetite and lift global stocks markets. The dollar and U.S. bond yields would likely come under downward pressure too – often bullish triggers for Asian and emerging markets.
Investors in Asia have to wait until Friday for the big two set pieces of the week.
More than three quarters of economists polled by Reuters expect the BOJ to keep policy unchanged, including its yield control scheme. BOJ Governor Kazuo Ueda has signaled his resolve to maintain massive monetary stimulus, despite inflation persistently outpacing the bank’s 2% target.
In a symbolic development last week, Japan’s annual rate of headline consumer inflation rose above comparable U.S. inflation for the first time since 2015. But the BOJ’s deflation battle scars run deep, so investor hopes of and end to super-loose policy are being pushed back further.
