A Weekly Announcements Forecast (20 Sep - 24 Sep)
I wanted to use the article this week to cover a few key announcements to look forward to over the coming 5 days. Interest rates appear to dominate this week and they happen to be one of the most significant drivers of a currency rate, so these announcements should definitely be in your calendars.
Tuesday 21 September
Chinese Loan Prime Rate 1Y - 21:30 EST
The Chinese Loan Prime Rate is the benchmark interest rate in China, the interest rate for a 1 year treasury bond. Typically, lower interest rates are used to promote spending, since there is less incentive to keep money in the bank and allow it to accumulate interest or to invest in bonds and instead take a riskier asset classes that could provide a higher return. A situation like one we’re living in currently is the perfect case study for low interest rates, because governments have a need to kickstart their respective economies. The Loan Prime Rate 1Y has been steadily low at 3.85% for 17 consecutive months, there’s no reason to expect this to change now. Subsequent rates will be an interesting topic to keep an eye on however, as China’s economy has not bounced back in the speed it was expected to and some extra stimulus might be require in the not so distsnt future.
BoJ Interest Rate Decision - 23:00 EST
The Bank of Japan’s interest rate is studied in a similar manner to the Chinese Loan Prime Rate. We’re assigning low interest rates with an aim to encourage spending and vice versa for higher rates. The Bank of Japan has kept their rate steady at -0.10% since January 2016 and there’s no expectation for that to change now. The minutes that are released with the interest rate decision will also be useful, because it may provide us with some more insights where the actual interest rate figure might not. A few months ago, during the July decision, the Bank of Japan noted that the Covid-19 recovery was in a “fragile” state. Japan is another country whose recovery appears to be significantly slower than others, but this is also being met with an unusually passive response from the Japan government given the gravity of the situation. This will be an interesting point to watch in the future, because if the economy continues to recover as slowly as it currently is, the government will have to get involved.
Wednesday 22 September
Federal Funds Rate and FOMC Economic Projections - 14:00 EST
The Fed Funds Rate is the interest rate target set by the Federal Open Market Committee (FOMC) members. It’s the rate at which retail banks borrow. It’s a useful number because it has a knock-on effect to the rates offered by these banks as APR for consumers such as ourselves or on credit loans. The Fed rate is expected to stay at 0.25%, as it has been since March 2020.
Alongside the rate, the FOMC also releases economic projections. This is a highly detailed document detailing the FOMC projections for key indicators, including but not limited to change in real GDP, unemployment rate, inflation, fed funds rate and justifications for the projections. An example of this release can be found here.
Thursday 23 September
GBP Official Bank Rate - 07:00 EST
Another Central Bank interest rate is released this week and this time its for the UK. The Bank of England has kept its rates steady at 0.10% since March 2020 and the projections are for this to continue. It’s worth remembering that the UK is in one of the best positions when it comes to Covid recovery and a 75% vaccination rate amongst adults is the primary driver of this.
Gfk Consumer Confidence - 19:01 EST
The Gfk Consumer Confidence is a measure for the confidence of consumers in UK economic activity. Similar to PMI measures we’ve encountered in the past, the Consumer Confidence is a survey, run every month since 1974, that has become a very reliable indicator of gauging sentiment in the economy amongst the retail spenders. The number for this measure has a central value at 0, with anything below representing a bearish sentiment for the economy and naturally anything above 0 representing a bullish sentiment for the economy.
JPY Inflation Rate YoY -19:30 EST
Japan’s inflation rate is a key component in understanding whether the government is keeping control over a consistent, but healthy increase in price. An healthy increase in inflation (typically around the 2% level) can help boost spending and production in an economy. Too high and the currency becomes devalued, especially if it is significantly higher than the other economy in a pair and has the potential to lead to more disastrous effects such as hyperinflation and social and political instability. This stresses the reason for governments to keep a control over this level and Japan being one of the premier economies in the world, this is an economic announcements that will reverberate around the markets, particularly because Japan has seen 10 consecutive months of negative inflation rates and the Bank of Japan has clearly stated its intentions to get this rate back to a 2% mark in the near future.