Turbulent week ahead, central banks in focus

As usual, volatility has been minimal so far on Monday as investors are bracing for this week’s barrage of central bank meetings.

Several central banks will decide about monetary policy this week, including the Fed, the Bank of Japan, the European Central Bank, and the Bank of England.

The Bank of England will likely hike interest rates for the first time since the COVID crisis. However, many economists have scaled their expectations to a rate hike in February, delayed from December. Therefore, this week’s meeting could bring some surprising, possibly causing volatility in the GBPUSD pair.

The Fed is widely expected to announce plans to quicken the tapering process as inflation continues to soar. Last week’s data showed that the US inflation rose +6.8% YoY – right as expected according to the CPI indicator. It was the fastest rate of increase since 1982. In addition, the core CPI jumped 4.9 YoY, meeting expectations, its highest since 1991.

Later today, The Bank of Canada monetary policy framework is due, along with the speech of the BoC governor Macklem, possibly influencing the USDCAD pair. 

The USD has already erased its Friday’s losses, and the EURUSD pair slid below 1.13 again. The GBPUSD [air traded near 1.32, while USDJPY advanced toward 114.

On the other hand, precious metals held their Friday’s gains, with silver moving above 22 USD and gold reclaiming 1,780 USD. Falling yields and rising inflation helped metals stage a slight comeback, but nothing impressive has happened in the metals. 

US indices returned to all-time highs, despite rising inflation and tighter monetary policy in the US. However, only a tiny number of large-cap stocks support indices in their rally, with most of the lesser-known equities already in a bear market, leading to a sharp decline in Nasdaq breadth. 

Source: https://www.axiory.com/analytics/market-news/turbulent-week-ahead-central-banks-in-focus