Concerns over the condition of the banking sector triggered a sell-off on the global stock markets this week and now investors hope that FED will ease its hawkish rhetoric at a meeting scheduled for next week.. We will get to know what Fed's response is the coming Wednesday at 6:00 pm GMT. However, rate decisions from the Bank of England and Swiss National Bank will also draw attention, and so will flash PMIs for September from Europe and US. Be sure to watch US500, DE30 and GBPCHF next week!
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FOMC rate decision is a key event of the week. The market anticipates the Fed will hike rates by just 25 basis points, in light of easing inflationary pressures and the recent banking turmoil. However, some expect that the central bank can reverse course if the financial system is in distress. We will see whether those expectations are met on Wednesday, 6:00 pm GMT and any deviation away from a 25 bp move could potentially trigger additional volatility on the markets. The meeting will also be closely watched as a new set of economic forecasts will be provided.
While central banks will draw the most attention next week, release of flash PMI indices for March may also trigger a jump in volatility. German manufacturing and services indices are expected to rise slightly compared to February releases and weaker-than-expected print could provide some fuel for DE30 bulls. As usual, focus in Europe will be primarily on releases from France (Friday, 8:15 am GMT) and Germany (8:30 am GMT).
Fed is not the only major central bank scheduled to announce a monetary policy decision next week. Investors will also hear from the Bank of England and Swiss National Bank, both decisions on Thursday. The former is expected to deliver a 25 bp rate hike. However, interest rate futures are pricing a 40% probability that rate will remain unchanged. At the same time SNB is in a tough situation, taking into account elevated inflation and uncertainties surrounding Credit Suisse. Investors expect a more dovish approach from Swiss policy makers. Market now expects only a 25 bp rate hike, while at the beginning of the month a 75 bp move was priced in.
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