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‘Noisy’ week ahead in financial data, amid key Fed, BOJ meetings

The recent risk rally is somewhat of an oddity. Global growth prospects did not show strong signs of improvement lately, nor have we seen solid corporate earnings. If anything, the fundamental picture is not consistent with demand for equities and futures.

The recent risk rally is somewhat of an oddity. Global growth prospects did not show strong signs of improvement lately, nor have we seen solid corporate earnings. If anything, the fundamental picture is not consistent with demand for equities and futures.

This week is going to be a “noisy” one for participants in financial markets. Not only do we have a barrage of eonomic data, we also have two key central bank meetings: The United States Federal Open Market Committee (FOMC) and the Bank of Japan (BOJ).

The Federal Reserve is in a dilemma. On the one hand, it is highly anticipated that it will not move on interest rates this week. On the other hand, it does not want to cement expectations that the rate hike cycle is going to be on hold for many more months. However, it will also be careful not to commit to any timeline. The task is made more challenging as any communique will be confined to a short policy statement after the FOMC meeting. There will not be any press conference.

The BOJ will make its policy decision after the Federal Reserve. The recent batch of weak data in Japan increases the possibility of more stimulus from BOJ. Moreover, any signs that the Fed is reluctant to lift rates would lift the value of the Japanese yen against the US dollar. A stronger yen hurts Japanese exporters and depresses import prices, which would make it more difficult to hit the inflation target. While BOJ Governor Haruhiko Kuroda has expressed his willingness for more easing measures, he has avoided giving a clear signal that any action is forthcoming.

Meanwhile, market participants would also be bombarded with economic data, which should help them to gauge the health of major economies. Starting with the US, we have new home sales and durable goods orders, alongside consumer confidence and employment cost index. More importantly, the advance release of Q1 GDP will be closely watched.

In Asia, Japan will have a data- heavy week, with inflation, retail sales, industrial production and employment figures slated for release. For China, it is worth monitoring industrial profits.

Singapore will also see its fair share of data, starting with inflation figures, followed by industrial output and jobless rate.

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