Although US markets will be closed on Friday 19 June in observance of Juneteenth, it will still be a busy week for traders. The focus is on a trio of major central bank decisions, with the Bank of Japan set to raise interest rates by a quarter-point to 1%, and the US Federal Reserve and the Bank of England expected to hold. There are also updates on the UK consumer price index (CPI) and US retail sales.
Central bank interest rate decisions
Tuesday 16 June (Bank of Japan) Wednesday 17 June (US Federal Reserve) Thursday 18 June (Bank of England)
Markets are pricing in a roughly 90% chance that the Bank of Japan will lift the cost of borrowing to a 31-year high of 1%. Meanwhile, the Fed, led by new chair Kevin Warsh, and the Bank of England are expected to leave rates unchanged. In each case, traders will be listening closely to policymakers' comments on the outlook for monetary policy, particularly given the recent reacceleration in inflation.
Alongside its rate decision, the Fed will also release its Summary of Economic Projections, which could offer important clues about the future path of policy.
The impact of the BoJ and Fed meetings may be felt by USD/JPY, which has risen back towards ¥160 per dollar, close to the highs of 29 April. Even with markets pricing in a BoJ rate hike, it would probably take more than a 25-basis-point increase to persuade traders to bet on a strengthening yen. The market might also require hawkish guidance and clear signals that further rate hikes remain possible. At the same time, if the Fed strikes a more hawkish-than-expected tone, perhaps by removing any easing messaging from its policy statement, that could put additional pressure on the yen against the dollar.
