An analysis of the data for the coming week

There is not much economic data released in next week’s calendar, but the main ones that have made traders curious are the possible continuation of the interest rate cut process by the BoJ and the meeting of the members of the Central Bank of Canada.

Bank of Japan

It is likely that the fallout from last week’s Bank of Japan meeting will continue this week. The Bank of Japan left its monetary policy and yield curve management unchanged at its January meeting last week. The move followed the December meeting when the central bank raised the 10-year bond yield to 0.50 percent. Traders assume this is the beginning of the end of accommodative monetary policy in Japan, but the BoJ chief has denied that claim. On Friday, Japan released its CPI index for December at 4 percent annualized, the highest level since 1981. This week, the Bank of Japan will release the minutes of its January interest rate decision. According to the head of Japan’s central bank, the move will regulate the current state of the economy and the outlook for inflation and economic growth. Watch for continued volatility in the yen pair this week.

Bank of Canada

The Bank of Canada will meet on Wednesday this week to review monetary policy. The Bank of Canada has often been one of the leaders in changing interest rates in the world. The central bank is expected to raise the interest rate by 25 basis points to an overnight rate of 4.50%. Last week’s CPI data for December showed inflation moving in the right direction, with the annual rate CPI at 6.3%, up from 6.8% in November. However, as with the previous week’s US CPI data, traders focused on the monthly CPI data, which fell 0.6% versus 0.1%. This was the largest month-over-month decline since April 2020. On the other hand, December employment data was strong in Canada. The country added 104,000 jobs, including 84,500 full-time positions. An increase of 8,000 jobs in December had been expected! With inflation easing (although still relatively high) and the promising employment report, will the Bank of Canada consider a halt to rate hikes at its meeting this week? We will all be waiting for the answer to that question.