LCG TV- Week Ahead: All eyes on Fed, BoJ & BoE

We have a very busy week ahead for the markets as the US Federal Reserve, Bank of Japan and Bank of England will announce their latest monetary policy decisions.

For the Fed, we see little suspense after the US added only 38’000 jobs last month. Over the last few days, traders in the FX market trimmed their long USD positions. Therefore, the Fed could be a ‘buy-the-rumour-sell the-fact’, in which case, we could expect a dovish Fed to trigger a relief rally in the US dollar, along with US stocks. But the upside in the US dollar is expected to remain limited should the Fed sound as dovish as it is expected to. Of course, if Janet Yellen insists on her optimistic take regarding the US economy, then the US-dollar could rally against the majors.

Another important event is the Bank of Japan interest rate decision. Governor Kuroda’s words revived speculations of additional monetary stimulus at the BoJ’s next big meeting on Thursday June 16th. The Japanese yen has been the unique currency to appreciate against the US dollar in Asia on Friday June 10th. Despite dovish Bank of Japan (BoJ) speculations, the yen fails to gather enough momentum on the short side. Rising dovish BoJ expectations could probably suggest that we could be approaching the range bottom toward the 105.56, May 3rd.

On Thursday, will also be watching the Bank of England’s last verdict before the Brexit referendum due on June 23rd. We expect the BoE to maintain the status quo at this meeting. The sterling will certainly remain under a decent selling pressure given the Brexit-related volatility. The market remains comfortably short sterling in the run up to the referendum. High volatility and choppy market conditions will be in play for those willing to trade the pound. We recommend our traders to carefully place their stop losses and be prepared for two-side volatility, although the market remains skewed on the downside.