Saturday July 30, 2016 - 11:49:47 GMT
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Waiting For Bank of England. Bank of Japan And Federal Reserve Disappoint
John M. Bland, MBA
Bank of England Ease Likely
Early last week, the U.K. received special post-Brexit flash PMI Manufacturing and Service PMIs. Both reports fell sharply as they came in below the 50 economic expansion level. Bank of England policy board member Wheale, a well known hawk expressed shock at the weakness of these data and indicated that policy ease at the upcoming meeting would be likely. Some expect a 25bp reduction in the 50bp repo rate, and possibly an increase in Quantitative Ease (QE).
Japanese Stimulus Plan Due
A major focus in the new week will be the fiscal plan by the Japanese government to support the economy. There is a growing recognition by key governments that monetary policy has run its course as a useful tool for stimulus. PM Abe is now expected to announce a fiscal stimulus on the order of JPY 28 tn on Tuesday, August 2. Analysts say the underlying stimulus is only likely to be one-quarter of that highlighted amount. Its exact size is yet to be determined and probably is still being finalized. There is apparently hope in the government that the program will ease some of the upward pressure on the JPY. The Bank of Japan policy announcement on Friday was disappointing for those expecting an aggressive easing.
Fed Policy Decision Disappoints
The Federal Reserve policy decision announced late Wednesday saw no surprises with its key Fed Funds target rate held steady. The central bank remained cautious but took a modestly more hawkish tone. The Fed noted the recent improvement in labor markets and other better data. Markets focused mainly on the lack of a signal for a September rate hike. The Fed continues to say that policy is data dependent and that future rate hikes will only be gradual. The 10-yr yield has tumbled to below 1.50% in the wake of the announcement. Traders took the lack of guidance about the September meeting as a signal that the earliest date for a rate hike likely now is December.
WEEKLY HIGH IMPACT NEWS:
All Day Final PMIs
04:30 AU- RBA Decision
12:30 US- PCE Deflator
All Day Final Service PMIs
12:15 US ADP Jobs
11:00 GB- Bank of England Decision
12:30 US/CA Employment and Trade
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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