After a busy week which was dominated by central bank meetings that included the Federal Reserve and Bank of England, markets will also await another major central bank meeting next week – the Bank of Japan.
The Fed’s highly anticipated meeting culminated with a decision on Wednesday to raise the Fed funds rate by 25 basis points as expected but the US central bank surprised the markets with a revision to its rate hiking cycle and indicated it would raise rates by at least three times next year instead of the two previously forecast in September. This boosted US Treasury yields and the dollar.
The Bank of Japan and the Fed’s monetary policies are diverging. The Fed has started tightening monetary policy but the Bank of Japan continues with its massive QQE (Quantitative and Qualitative Easing) programme.
The BOJ will announce its decision on Tuesday and is expected to hold its negative interest rates and 10-year JGB government bond yield target steady. The Bank is also expected to keep the pace of the annual increase in JGB holdings at around 80 trillion yen. The yen has weakened significantly versus the dollar as a result of the Bank’s policies. The focus for next week will be on how the BOJ’s view on the economy.
Staying in Japan, the nation releases trade balance data for November on Monday.
On Tuesday, the Reserve Bank of Australia will publish the minutes of its December monetary policy meeting.
Remaining on the central bank theme, the Swedish central bank will announce its decision on interest rates and publish its monetary policy report on Wednesday.
There will be a barrage of data out of the US next week, mostly on Thursday. This will include durable goods orders for November (expected to fall), personal income and personal spending, and final GDP for the third quarter. This will be the third estimate of the growth figure and it is not expected to change from the second estimate’s 3.2% growth rate (which was upwardly revised from an initial estimate of 2.9%).
More data out of the US on Friday include the final University of Michigan consumer sentiment report and new home sales.
GDP figures are also due from Canada and the UK on Friday. It will be the UK’s final reading of third quarter growth.