Central banks perspectives are still going to play an important part in forex trading this week as fundamental releases such as CPI and unemployment will indicate future policies.

Geopolitical risks over the weekend rose due to tensions in Ukraine; it has boosted gold and depreciated Euro. However, central banks perspectives are still going to play an important part in forex trading this week as fundamental releases such as CPI and unemployment will indicate future policies. We have gathered the following briefs for you to better understand the direction that have been taken by central banks in the US, UK, Eurozone, and Japan.

 

Fed Rate Hike - Uncertainty Looms

Publication of FOMC minutes last week depicted dovish profiles, a far cry from Janet Yellen's earlier statement that rate will be hiked sooner than later. Consequently, greenback dropped in some pairs. Still, market players are hesitant to short it completely as long as Fed stays on the tapering road as planned. USD fluctuative movements on the chart has shown this trend.

Upcoming releases from US is not expected to make too much waves if the statistics does not much changed. What needs to be observed is Yellen's speeches on Tuesday and Wednesday. Regardless of her past misspoken adventures, the market wants some clue on when the Fed will hike rates. Nevertheless, it is possible that she will not be as chatty about rate hike as in previous events. If that is what happen, then USD will continue in uncertain fundamentals.

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BoE Rate Hike - The Better, The Sooner

BoE Monetary Policy Committee meeting last week resolved to hold rates at 0.5%, a record low rate that has been in effect since 5 March 2009. As the result of prolonged low rate, UK now has to deal with rising house prices. It should be noted that US Subprime Mortgage Crisis also stemmed from similar housing bubble. That is why some have warned BoE to put a stop as soon as possible by hiking borrowing rates.

Fortunately, analysts are becoming more sanguine on the matter. There are 73% in a group of analysts surveyed by Bloomberg last month that agreed with housing prices heightened risk. But this month, the number down to 58%. We have to admit that UK first quarter economic performance is quite impressive. Even unemployment has fallen to 7.2%. But BoE officials have stated that they won't hike rates until unemployment touches 7% mark.

The circumstances have made it important for us to observe UK CPI and Unemployment rates releases later in the week. BoE Governor, Mark Carney has signalled the possibility of rate hike before May election, but some analysts reserves doubts; we have to see some more consistent fundamental recovery before BoE take a step forward.

 

ECB Stimulus - No Action, More Gain

Boris Schlossberg from BK Asset Management mentioned that the European Central Bank dig their own grave by ignoring deflationary risk in Europe. It is undeniable that Eurozone and its individual countries' inflations are falling from time to time. The longer it goes on, the more complicated it is going to be. The falling stocks and Euro appreciation against USD are two things that will make it more difficult to handle. On weekends, ECB Governor Mario Draghi have opened up stimulus again, but the Euro will need more than jawboning. As long as ECB do nothing, there is every possibility that EUR/USD will go back up to 1.4000.

 

BoJ Stimulus - Tax On Inflation

Japan decision to hike consumption tax may disrupt economic improvements that have been achieved. As expected, small companies tend to absorb tax instead of charge it to consumers. Ministry of Economy, Trade, and Industry even have deployed 474 inspectors to ensure that such happening is being straightened. On the other hand, the tax may very well overburden consumers as salaries are falling.

In short, instead of supporting inflation target accomplishment, the tax hike could mess it up. But don't worry, BoJ Governor, Haruhiko Kuroda, have said that they are prepared to act if 2% inflation target is disrupted. Economist from Goldman Sachs predicted that if dataset from April to June show such risk, then BoJ could decide on more stimulus in July meeting.

If you trade the Yen, note Kuroda speech schedules this week. It is possible that he will explain the BoJ reading of Japan current economy, which may or may not spurr BoJ to add more stimulus.