Market Analytics from AcademyFX

Market Analytics from AcademyFX

Market Analytics from AcademyFX

I would like to start the analytical review with the situation in the yen. In the speech of the head of the Central Bank of Japan, the key was the following: at the moment, there will be no interest rate increase, but if inflation accelerates, the Central Bank will review the target levels of interest rates and change monetary policy.



The Japanese economy has been stagnating for a long time, but it has started to show improvements in recent months. In particular, basic consumer prices rose in January for more than a year. If you look at some of the analysts ' reviews, they expect the economy to continue to grow slowly but steadily. All this information together led to a change in market expectations. Most analysts now believe that the next step of the Bank of Japan will be to curtail the ultra-soft monetary policy that the Central Bank itself has long adhered to.



Britain's exit from the EU, as you know, led to a sharp drop in the pound – this means that all imported goods have risen in price. Along with the rise in oil prices, inflation began to accelerate. At the moment, the Bank of England expects that inflation will not be 2% (as planned), but will reach 2.8% under an optimistic scenario. At the same time, many analysts have an inflation rate as high as 3%. Such a sharp increase may force the Bank of England to tighten monetary policy faster than previously planned.

Retail sales data released last week were higher than expected, suggesting that people are actually spending money. If people spend money, it is likely that the economy is still developing at a better pace than expected before leaving the EU. It was said at the time that the economy would stagnate, but the reality is not so bad.

This week, most likely, the brexit procedure will begin, but all this is already in the price, so this will not surprise anyone. But no one expected such rates of inflation and economic growth. In addition, UK GDP data will be released on Friday, which should be closely monitored. If there are strong differences with the forecast indicators, then you will need to reconsider your trading ideas about the pound.



In the United States, a health care reform bill that was intended to replace the affordable care act introduced by Obama was withdrawn on Friday. This happened when it became obvious that the new law would not be able to get enough votes even from Republicans. Trump's inability to reach an agreement even with the Republican Parliament raises doubts that he will be able to implement his economic policies, including tax cuts, deregulation of the economy, and increased spending on infrastructure projects.

Against the backdrop of this failure from the Republicans, Yellen's speech should be followed on Tuesday. What matters is what they will now expect from the economy. On Thursday, US GDP data will be released, if the values differ significantly from expectations, it will indicate that there may not be 3 rate hikes in 2017.

On Friday, the consumer price index for the Euro Zone will be released with a forecast of 1.8%. If again everything is above forecasts, this will be the third CPI data that beats forecasts. At the last speech, Mario Draghi said, in the opinion of the ECB, their current policy has led to success and what they planned. If we see an acceleration in inflation, and such a soft policy of the ECB will lead to the goals set, it means that it will begin to curtail a little, giving a new stimulus to the Euro.

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