A look at the day ahead in European and global markets from Brigid Riley
There were no surprises at the end of the Bank of Japan’s December monetary policy meeting on Tuesday, which handed down the widely expected decision to leave ultra-easy policy settings and dovish forward guidance unchanged.
There’s still a crackle of anticipation left this Tuesday, however, over the BOJ governor’s press conference at 3:30 p.m. (0630 GMT). The markets will be listening closely for any hints that Governor Kazuo Ueda may drop about when the central bank plans to make its much-awaited exit from negative short-term rates.
More than 80% of economists polled by Reuters expect the Japanese central bank to say “sayonara” to its outlier policy by the end of 2024, with one-fifth saying the pivotal move could happen as early as January.
It will be a communications challenge for the BOJ chief, who is expected to attempt a delicate balancing act: How to keep markets on their toes for the first rate hike in more than a decade by one of the world’s most dovish central banks, without stirring up too much excitement.
The yen gave up some ground against the greenback, briefly slipping as low as 143.78 per dollar in the wake of the decision, while Japan’s Nikkei rallied. The benchmark 10-year Japanese government bond yield edged down to 0.650%.
In the meantime, MSCI’s Asia ex-Japan index weakened slightly.
As the BOJ battles to contain a market ready to boil over at the slightest hint of a policy reversal, the European Central Bank and the Federal Reserve are once again grappling with a wholly different sort of problem.
Chicago Fed President Austan Goolsbee and outspoken ECB dove Yannis Stournaras on Monday joined a growing chorus of central bank officials pushing back against market expectations for a spring rate cut.
Goolsbee will have another chance to clarify his stance during a live interview later on Tuesday. Atlanta Fed President Raphael Bostic is also scheduled to speak about the U.S. economy at a separate event.
U.S. housing starts and a final reading of euro zone inflation in November top a light calendar for economic releases on Tuesday.
Key developments that could influence markets on Tuesday:
Euro zone final Nov HICP
U.S. Nov housing starts
Appearances by ECB policymaker Peter Kazimir and ECB board members Andrea Enria and Frank Elderson
Fed’s Raphael Bostic and Austan Goolsbee speak
BOE Deputy Governor, Financial Stability, Sarah Breeden gives speech
(By Brigid Riley; Editing by Edmund Klamann)
