The decision of the Bank of Japan to keep monetary policy unchanged disappointed investors.
The yen sharply went up in the market. In the pair USD/JPY the yen's rose by 300 points against the USD last Friday. The Bank of Japan decided to buy shares of the funds (ETF) on the stock exchanges for the amount of 6 trillion yen per year. The volume of government bonds purchase was left at the previous volume of 80 trillion yen, the rates on deposits of the commercial banks was also left unchanged, at the level of -0.1%.
Last Wednesday the US Fed also made decisions to leave interest rates unchanged, stating that the short-term risks to the economic growth have declined. The US Central Bank hinted at the possibility of the rate hikes in the next few months, although the Bank did not clearly confirm that the rate hike can take place in September. It seems possible that the rate can be increased by 0.25% in December.
The USD has significantly weakened last week against major counterparts.
The new scheduled for the release this week is as follows: Three major events, which are expected this week, are interest rate decision by the Reserve Bank of Australia (Tuesday, 06:30 GMT+2), Interest rate decision by the bank of England (Thursday, 13:00 GMT+2), US labor market data for July (Friday, 14:30 GMT+2).
16:00 (GMT+2) – US data on ISM business activity index in the manufacturing sector and inflation acceleration data for July.
03:30 – Australian foreign trade balance for June.
06:30 – interest rate decision by the RBA. In the following up comments the RBA will assess how current level of the interest rates affects economic growth and inflation in the country. The bank will also indicate monetary policy plans for the near future. It is expected that the interest rate will be lowered by 0.25%, to 1.50%. If it happens, the Australian dollar will go down in the market.
10:30 – business activity index PMI in the British construction sector for July. This index assesses business climate and environment in UK construction sector.
11:00 – producer price index in the Eurozone for June.
14:30 – index of personal consumption expenditures, personal income/spending in the USA in June.
After 16:00 – price index for dairy products from the “Global Dairy Trade” will become known. This data can affect movement direction in the New Zealand dollar.
22:30 – American Petroleum Institute (API) will release report on changes to the US oil inventories for the last week.
01:50 – the meeting of the monetary policy Committee of the Bank of Japan, where economic situation in Japan will be analyzed and future plans will be worked out.
03:45 – Caixin PMI in the Chinese service sector for July. As the economy of this country is the second largest in the world, this indicator can have a strong influence on the Forex market.
09:00 – meeting of the ECB.
10:00 – Markit business activity index in the manufacturing and services sectors of Eurozone for July.
14:15 – ADP unemployment rate in the USA for July. This index can have a strong impact on the market and the USD. However, it does not have a direct correlation with Non-Farm Payrolls. It is expected that the number of employees in the US private sector will fall by 4.000 (168 000 against 172 000 in June).
15:45 – Markit Economics index of business activity (PMI) in the service sector during for July. This index evaluates of sales and employment, and also gives indications of the future development in the service sector.
16:00 – ISM index of business activity (PMI) in the US service sector for July.
16:30 – US Department of Energy will issue data on changes to oil and oil products inventories.
03:30 – Australian retail sales data for June (It is expected that the index will grow by 0.4%, which will have a positive impact on the Australian dollar)
07:45 – SECO consumer confidence for Q3 in Switzerland. The indicator evaluates inflation rate in the country. High level of this index is favourable for the Swiss franc and Vice versa.
13:00 – interest rate decisions by the Bank of England. This meeting of the Bank of England will be the second after the referendum. At the previous meeting, the rate was not lowered. Earlier, the Bank of England Governor, Mark Carney gave to understand that the rate might be lowered in the summer. If the rate is lowered at this meeting, the pound will go down to the new lows. Quantitative easing program will be also adopted.
13:30 – Mark Carney's comments on the Bank’s decisions. High volatility in the Pound is expected in the period from 13:00 to 13:30.
14:30 – initial claims for unemployment benefits in the USA for the last week.
16:00 – manufacturing orders in the USA in June.
03:30 – comments the RBA on monetary policy in the country.
07:00 – indexes of coincident/leading indicators of Japan for June (preliminary indices).
14:30 – monthly data on the US labor market for July, including Non-Farm PayRolls and unemployment rate.
19:00 – report of the oilfield services company Baker Hughes on the number of active drilling rigs in the USA, which is an important indicator of the situation in the US oil sector. This index has a significant impact on the oil prices. At the moment, the number of active rigs in the US is 374.
Investors will be focused on the data US on Friday, as it can indication of the possibility of the interest rate hike in the USA. Positive data will revive hopes of the market participants for the interest rate increase. Negative data will cause further decline of the USD in the financial market.