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Week Ahead – Fed minutes and central bank meetings will attract attention post-Easter

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FED1The coming week will be starting on a quiet note as the major markets in Europe will be closed for the Easter break. This includes Germany, France and the UK, as well as Australia and New Zealand in Asia. The main data coming out on Monday, April 6 is the ISM Non-Manufacturing PMI in the US, although a speech by the Bank of England Governor Mark Carney will also be interesting to watch for any possible changes to the Bank’s outlook on inflation and the economy.

The highlights of the week will be coming from the central banks as the US Fed will be publishing its latest FOMC minutes on April 8, which will be watched closely for any further indications as to the exact timing of when the Fed will increase interest rates. The dollar has been volatile in recent weeks as markets have been receiving conflicting signals of when the Fed will begin to raise rates from current historic lows. US payroll and earnings data coming out on April 9 could also have an effect on the dollar’s recent surge to 11-year highs against a basket of currencies.

In the UK, the Bank of England will hold its monthly Monetary Policy Committee on April 9. The market widely expects the Bank to hold interest rates steady. UK Trade data to be published on April 9 and manufacturing, industrial and construction output data to be released on April 10 should also shed some light as to how the rebalancing of the UK economy away from consumption is progressing and the strength of the economic recovery.

In Asia, more interest rate decisions are expected from the Reserve Bank of Australia on April 7 and the Bank of Japan on April 8. The majority consensus is that the RBA will cut interest rates by a further 25 basis points, following February’s surprise cut. The recent falls in the value of iron prices, slower than expected economic growth, as well as an exchange rate that is still potentially overvalued, have all increased the likelihood that the RBA will take action in the coming week. In Australia, the retail sales for March will be published which could also impact the Australian dollar.

In Japan, it is not expected that the Bank of Japan will announce any changes in its policy setting meeting. Finally, March inflation figures for China will be released on April 10 and it will be interesting to see if price pressures will ease after February’s jump or if they are cooling down.

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