Looking Ahead: Focus on Japan's Central Bank, Price Increases, and China

The inflation data from the Eurozone, the UK, and the US may impact expectations regarding monetary policy, as the Bank of Japan contemplates a shift away from negative interest rates.  

Highlights

• The Bank of Japan's forward guidance on negative rates will be a key focus on Tuesday.
• Inflation data from the UK, Eurozone, and US will assess market sentiment regarding central bank monetary policy.
• Discussions surrounding China's stimulus efforts and the People's Bank of China will also be significant focal points in the week ending December 22.

The US Dollar:

Tuesday's focus will be on the US housing sector, an essential barometer for the US economy. Any decline in housing sector conditions could impact consumer confidence and consumption, with implications for Fed rate paths. Later in the week, attention will turn to GDP, jobless claims, and the Philly Fed Manufacturing Index numbers, followed by personal spending, core PCE Price Index, and personal income figures, all of which could influence Fed interest rate projections.

The EUR:

The EUR/USD will be influenced by German business sentiment, Eurozone inflation numbers, and German economic indicators. Investors are also advised to monitor ECB commentary, as any deviation from the higher-for-longer guidance at the ECB press conference could impact the EUR/USD.

The Pound:

Consumer price inflation and economic indicators, such as Q3 GDP and retail sales figures, will be key areas of focus for the Pound, while factors like Bank of England commentary will also play a pivotal role.

The Loonie:

Inflation figures, retail sales, GDP, and crude oil prices will influence demand for the Canadian Dollar.

The Australian Dollar:

RBA meeting minutes, stimulus discussions from Beijing, and iron ore prices will impact the demand for the Australian Dollar.

The Kiwi Dollar:

Consumer sentiment, as indicated by the Westpac Consumer Sentiment Index for Q4, will be crucial for the New Zealand Dollar.

The Japanese Yen:

Focus will be on the Bank of Japan's interest rate decision and guidance, as well as economic indicators such as trade data and national inflation, to gauge sentiment towards BoJ monetary policy.

Out of China:

The PBoC's potential decision regarding loan prime rates will be a focal point, with implications for commodity currencies and riskier assets.