Markets are awaiting important news from the Federal Reserve and Bank of Japan meetings which will conclude tomorrow (21st Sep). News announcements as important as this could help traders set their expectations in terms of central bank policies in both the United States and Japan.
The Federal Reserve is likely to keep interest rates unchanged this week in the face of disappointing U.S. economic data over the past month, despite the insinuations recently made by some Federal members. Such hints could be seen as obstacles to U.S. interest rate hikes in September. Traders should pay close attention to the tone of the Fed Chair Janet Yellen’s speech. It could cover the economic outlook, the labor market, inflation and could fuel expectations of an interest rate hike before the end of this year, particularly in December.
However, the Bank of Japan’s meeting could have a stronger effect on the market than the Fed’s meeting. The BOJ could potentially lower interest rates to below -0.1. It could also change the bonds purchasing structure by increasing the short-term bond purchases in efforts to support the long-term bonds yields.
Traders should focus on the Bank of Japan’s monetary policy assessment report, which will be announced after the meeting. The report will show the effectiveness of the monetary policy adopted by the BOJ and its effect on the central bank’s 2% inflation target.
Tomorrow is not going to be a regular day. There might be some serious changes in the Forex market in particular and in international markets in general until a clearer image has been drawn on the type of market trends that will be established over the coming days.