In a speech today, BOJ governor Haruhiko Kuroda vowed to continue to expand the monetary base to maintain the economy’s momentum in order to achieve the BOJ’s price target, reiterating that the central bank would make policy adjustments to reach that goal.
Dovish central bank rhetoric from the European Central Bank and the Bank of Japan has increased the anticipation for the U.S. Federal Reserve’s Federal Open Market Committee on Wednesday, May 2. Data has put three more rate hikes firmly on the table.
Inflation anxiety triggered a sell-off in global stock markets with the Fed expected to ramp up their interest rate hike path yet the dollar did not benefit as higher rates have already been priced in by the market.
It’s been an interesting week as events made headlines and shook up financial markets. Donald Trump’s speech at Davos was eventful, and as expected, Trump pushed his America first agenda while making the argument for fair and reciprocal trade.
Despite the distraction of a U.S. government shutdown, the focus of capital markets this week will return to the more upbeat message of the global growth upswing and a couple of G7 central banks monetary communications.
The US dollar remains weak versus most majors due to downward pressure from the government shutdown. The House of Representatives passed a short-term funding bill, but it did not get enough votes to pass the U.S. Senate.
The U.S. tax cut vote is expected to take place Tuesday and will almost certainly pass. It will go onto a Senate vote later in the week and possibly allow President Trump to sign it into law ahead of Christmas.
This is a busy week on many fronts: there are geopolitical risks in Spain (Catalonia) and the US, a plethora of Central Bank meetings, and a busy season of corporate earnings along with US data that will keep capital markets on its toes.
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