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Weekly Market Outlook: Fed & BoJ are expected to hold, Economic Data Eyed

Amid global economic uncertainty, markets search for any glimpse that could confirm the economy is on its way to full recovery. And Now after BoC delivered a hawkish signal last week, focus on Fed and BoJ meetings later this week. However, a similar hawkish tone is not expected for the moment. So, Traders will likely focus on economic data on this week’s calendar, including Australian CPI and US GDP data. 

BoJ to lower Inflation Outlook while Curbing Covid 19 

No policy changes are expected from BoJ’s meeting on Tuesday. Markets are anticipating that the bank will hold the policy rate in the negative territory at -0.10%. The economy has shown a stable recovery backed by flourishing exports. But the increase in Covid 19 cases will somehow cap prices movements. BoJ is scheduled to release its latest Outlook Report, in which it may lower the inflation outlook for the current year while keeping its upbeat outlook regarding the domestic economy. Japan has been one of the least affected countries by the pandemic, and full lockdowns have never been used. That helped the economy in Japan to maintain its steady growth pace which is expected to continue unless the country is hit harder by the pandemic in the coming months. 

Steady Inflation likely to support Aussie 

Australian CPI data for the first quarter will be released later this week. Data is expected to show a steady rise in inflation towards RBA’s target supported by rising energy prices. The Aussie could benefit from positive inflation data to end the downside correction against the USD. Overall AUDUSD trend will be clearer after the Fed’s meeting and how markets will react to the committee’s forward guidance. 

Fed to Maintain Current Policy Stance, Data in focus

The Federal Open Market Committee (FOMC) will conclude its two-day meeting on Wednesday with a monetary policy decision followed by a press conference from Federal Reserve Chair Jerome Powell.

Market participants are expecting no major changes to the easing policy, with the Fed reaffirming the continuation of monetary easing where benchmark interest rates would remain on hold at least till 2023. Fed officials have signaled that thinking about tapering easing policies is not on the table, given the arising uncertainty around the pandemic case, and despite the outperforming economy. 

With markets looking forward to the earnings season next week, as top companies including Apple, Facebook, Amazon, Microsoft, and Tesla are scheduled to report their Q1 results and dovish Fed statement, Wall Street will fly to new highs. On Friday, GDP is expected to show stronger growth momentum during the first quarter.

Annual growth to accelerate from 4.3% to 6.5% supported by fiscal and monetary stimulus. While the Fed’s preferred inflation gauge, the core Personal Consumption Expenditures price index, is expected to rise to 1.8% in March, hovering around the 2% targeted rate. 

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