Attention on the Bank of England (BOE) policy announcement "Super Thursday"! "Key points on January 30 and the event schedule"
Yesterday's FOMC was as expected held steady, and I think the press conference contained somewhat dovish remarks.
Regarding the much-watched hidden QE, while they will adjust the excess liquidity that has been supplied, QE itself will continue through April.
Attention will now be on the balance sheet and stock price situation.
Additionally, the risk-off factor of the coronavirus spread continues, but the stock prices are moving steadily, perhaps having priced it in to some extent, or perhaps due to a rebound after a drop that was excessive.
It looks like a day to determine whether this is a correction or a priced-in situation.
Today is the end of the month and the 50-day period, so I would like to pay attention to the onshore rate and fixes.
◎ Today's Points of Interest
1) Super Thursday
Today the Bank of England (BOE) is scheduled to announce its policy rate.
Moreover, this is a “Super Thursday” when an Inflation Report is released quarterly at the same time.
An Inflation Report is a release of economic data such as growth and inflation outlooks, and depending on its contents it can have an important impact on the exchange rate.
Super Thursday, when the Inflation Report is released simultaneously, has always been highly anticipated, but this time expectations for rate cuts are about 50-50, increasing the level of attention.
Firstly, regarding rate cuts, based on forecasts from Western banks, views differ between cuts and hold; today a rate cut and a March rate cut are in contention, making the probability of a rate cut about 50%, so regardless of the outcome, the pound is expected to move.
Secondly, if the policy remains unchanged, attention turns to the voting distribution of the MPC members who will decide policy changes.
Since policy change is decided by a majority of 9 MPC members, the voting distribution draws focus, and current expectations are a 3 vote for rate cuts and 6 votes for hold.
If there are 3 votes for a rate cut, it is unclear how the pound will react.
If there are 4 votes for a rate cut, the pound may be sold off temporarily as a signal that a cut is imminent.
If there are 2 votes for a rate cut, the prospect of a cut is further away than expected and the pound may be bought temporarily.
Finally, beyond the policy rate and MPC voting distribution, if the Inflation Report is revised downward or upward, it will affect the pound.
If the hold scenario occurs, it could move on the voting distribution as described above, but if the Inflation Report moves in the opposite direction, the moves may offset and the market could see little movement (a do-si-do). If the Inflation Report and voting distribution align in the same direction, it could lead to significant movement.
Britain's Brexit deadline is tomorrow; will policy change occur before that?
Also, will fiscal policy be bypassed in favor of monetary policy changes in the new fiscal year?
With Governor Carney's term ending in March, will he vote on policy changes?
These questions may be among the reasons for heightened attention this time.
We should pay attention to the policy announcement and Governor Carney's press conference.
There is a recently recorded video available for reference ↓↓↓
2) Risk Off
The spread of the novel coronavirus does not seem likely to subside.
The spread appears to be exceeding that of SARS, raising concerns about the impact on the economy from the coronavirus.
China's economic activity is stopping, with significant impacts on manufacturing in particular.
With the National People's Congress approaching, President Xi Jinping likely wants to bring the outbreak under control soon and support economic recovery.
Therefore, they asked WHO to avoid declaring a public health emergency, and recently they managed to avoid it, but it seems they are now in a situation where avoidance is no longer possible.
Today WHO plans to convene an emergency meeting to discuss whether to declare a public health emergency again.
The focus will be on whether the outcome is content favorable to China, whether it becomes a public health emergency, and whether it truly constitutes avoidance of an emergency declaration; the details of the announcement will be watched closely.
Also, hidden behind the coronavirus issue, President Trump’s impeachment trial may feature testimony from former national security adviser Bolton; what he says is also under close watch.
◎ Today's Event Schedule
Thursday, January 30
16:00 JPY Amamiya, Deputy Governor of the Bank of Japan, speech
17:55 EUR Germany unemployment rate
19:00 EUR Eurozone consumer sentiment index and unemployment rate
21:00 GBP Bank of England policy rate, statement, MPC voting distribution, Inflation Report release
21:30 GBP Carney, BOE Governor, press conference
22:00 EUR Germany HICP (inflation)
22:30 USD US GDP
Friday, January 31
Brexit deadline
03:00 EUR Weidmann, President of the Bundesbank, statement
