It was another big week for financial markets last week, with volatility remaining elevated as geopolitical and fundamental drivers continued to pull markets in different directions. The war in the Middle East pushed oil prices firmly back through the $100-a-barrel level, while the latest US data shifted expectations heavily towards another Federal Reserve rate hike. This week brings interest rate decisions from the Fed, Bank of England and Bank of Japan, while geopolitics remains the major wildcard.
📌 Highlights
- FOMC Interest Rate Decision – USD
- Bank of Japan Interest Rate Decision – JPY
- Bank of England Interest Rate Decision – GBP
The war in the Middle East remained front and centre, pushing oil prices firmly back through the $100-a-barrel level and adding to inflation concerns across global markets. At the same time, the latest US data has seen expectations swing heavily towards another Federal Reserve rate hike, setting up what could be a crucial FOMC meeting in the coming days.
There is little reason to expect volatility to ease this week. Three major central banks are due to announce interest rate decisions, with the Fed, Bank of England and Bank of Japan all in focus. Expectations around both the Fed and BoJ have shifted significantly over recent weeks, leaving plenty of scope for sharp moves across currencies, bonds and equities.
Geopolitics will remain the major wildcard. There was some optimism on Friday around the potential reopening of the Strait of Hormuz, but developments over the weekend have again highlighted just how fragile the situation remains. With hostilities continuing and little indication that a lasting peace agreement is close, traders will remain highly sensitive to headlines throughout the week.
📅 Monday
The week gets off to a relatively quiet start on the economic calendar, with Canadian CPI the only major data release likely to generate significant interest later in the day.
However, traders are expecting anything but a quiet start to markets. Weekend developments in the Middle East and on key AI stocks should drive early sentiment, while any fresh headlines during the trading day could quickly ramp up volatility.
📅 Tuesday
The calendar steps up on Tuesday, with Chinese markets in focus during the Asian session as a major batch of economic data hits the wires. Industrial Production, Retail Sales and the latest Unemployment Rate are all due and should provide another important update on the health of the world’s second-largest economy.
Attention switches to the UK on the European open, with the latest employment figures due ahead of Thursday’s Bank of England decision. The New York session is relatively light by comparison, although the Empire State Manufacturing Index could generate some movement in US markets.
📅 Wednesday
Wednesday is the big one for global markets, with the Federal Reserve interest rate decision dominating the day’s agenda.
There is plenty for traders to negotiate before the Fed takes centre stage, however. UK CPI and PPI numbers are due during the London session and could have a significant impact on sterling and expectations for the Bank of England ahead of Thursday’s decision.
US Retail Sales will then hit the market early in the New York session before attention turns firmly to the FOMC. With expectations having shifted strongly towards another rate hike over recent weeks, both the decision and accompanying Fed communication have the potential to generate substantial moves across the dollar, Treasury yields, equities and gold.
📅 Thursday
Thursday brings another packed calendar, starting with New Zealand GDP early in the Asian session.
The main event comes during the London day, when the Bank of England announces its latest interest rate decision. UK markets will already have digested employment and inflation numbers earlier in the week, meaning any change in the rate outlook could see significant volatility across sterling and UK assets.
The US session then brings the usual Weekly Unemployment Claims numbers alongside the Philadelphia Fed Manufacturing Index, with markets also likely to remain sensitive to any follow-through from Wednesday’s FOMC decision.
📅 Friday
There is no let-up heading into Friday, with the third major central-bank decision of the week coming from the Bank of Japan.
As usual, there is no fixed release time for the BoJ decision, although it generally arrives around Tokyo lunchtime. Expectations around Japanese monetary policy have shifted considerably in recent weeks, and traders will be braced for another potentially volatile session in the yen, particularly given the huge moves already seen in USDJPY.
UK Retail Sales will provide another potential catalyst early in the London session, while the New York calendar is relatively quiet.
By that stage, however, markets will have worked through three major central-bank decisions, a raft of tier-one economic data and potentially another week of major geopolitical developments. Traders should expect volatility to remain elevated right through to the final bell.