Next week, major central banks will announce important monetary policy decisions. The Bank of Japan, the Federal Reserve, the Swiss National Bank, and the Bank of England will all hold meetings. The Fed and BOE are expected to keep their rates steady. The Swiss National Bank, on the other hand, might lower rates by 25 basis points. The Fed’s meeting will draw significant attention for its rate decision and updated economic forecasts, including the dot plot showing future rate expectations. Although President Trump is advocating for rate cuts, Fed officials are cautious due to uncertainties surrounding tariffs and their potential impact on inflation and jobs. The situation for the Fed remains complicated. Rising oil prices and escalating tensions between Iran and Israel are significant factors. While U.S. economic growth is positive, recent Consumer Price Index (CPI) and Producer Price Index (PPI) data indicate that a modest rate cut might be possible. The Bank of Japan continues its very loose monetary approach. Other noteworthy events include U.S. retail sales, Australian employment data, and UK retail sales figures. High geopolitical risks are still affecting global markets. The upcoming week will feature announcements from the BOJ, the Swiss National Bank, and the Bank of England, along with various important economic indicators and speeches from key financial leaders. This week promises to be busy with major monetary updates and important market data. Central banks from the US, Japan, the UK, and Switzerland will be updating their policies. It’s unusual for all four to meet around the same time, which could lead to short-term market changes. For those tracking interest rate derivatives closely, the upcoming announcements could cause a quick reassessment of policy expectations, especially as economic indicators vary across regions. To clarify, the Federal Reserve is not expected to raise rates now. They have indicated a wait-and-see approach, despite political pressure to cut borrowing costs. Fed officials are hesitant because inflation, while lower than before, has not returned to target levels. Rising costs in services and energy also complicate the situation. With recent oil price increases posing risks to inflation, a clear easing cycle is not yet in sight. It’s important to note that the updated dot plot—not just the headline decision—might create the most market volatility, especially if there are changes in the median expectation for rate cuts in 2024. In Japan, Ueda remains steady. Although inflation numbers have climbed, core inflation has not shown the strength needed for a policy shift. So, the BOJ is unlikely to change its dovish stance anytime soon. This situation doesn’t provide much for aggressive rate traders, aside from potential shifts in currency, but JGB volatility could rise if market expectations for policy normalization are unexpectedly adjusted. The Swiss National Bank may take action soon. Current expectations are balanced, but there’s a fair chance they’ll cut rates by a quarter point. The strength of the Swiss franc has helped keep imported inflation low, allowing for a cautious decrease. Markets have partially accounted for this, but an official cut could lead to a significant yield adjustment in short-term swaps. Conversely, the Bank of England has been in a tough spot for months. Though inflation has decreased, wage pressures linger and consumer demand is showing some softness. Bailey and his team are expected to hold rates steady again. However, if the monetary policy summary suggests possible easing later this summer, it could move short-term UK OIS pricing. Given the persistence of services inflation, we think they will continue their cautious messaging for now. For us, the focus is less on the headline decisions—many of which may already be factored into the market—and more on the guidance, underlying data, and the tone during press conferences. We’ll be watching for any signs of inflation tolerance and whether policymakers start to adjust their views on the trade-off between growth and inflation. Beyond the central banks, key data next week will be significant. In the U.S., retail sales will provide insight into household spending. Following last month’s unexpected results, any new signals of declining demand could raise the likelihood of a rate cut this fall. The UK’s retail numbers may also impact Gilt yield curves if consumer weakness deepens. Additionally, Australian jobs data is crucial. If unemployment rises or job growth falls short, expectations for RBA rate cuts—already precarious—could change quickly. Geopolitical tensions, especially in the Middle East, remain critical. Market sensitivity to oil prices cannot be ignored. Even traders without direct energy positions must consider the inflation effects on rate curves. This heightened awareness will be important, even beyond scheduled economic events. As key financial officials speak throughout the week, paying attention to nuances is essential. It’s often in spontaneous moments—panel discussions, Q&A sessions, and off-the-cuff comments—where true policy insights may emerge. During weeks like this, every word matters. We’ll be aligning our short-term trading strategies with these key moments. With so much information coming in, rate curves, especially in the 2Y-5Y range, could be very responsive to every new detail. There is likely to be a lot of movement—not just from unexpected output, but from changing forecasts. Staying flexible, especially regarding expectations versus actual decisions, is crucial.

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