Central bank decision derby starts on Wednesday in Japan

It’s a big week for central banks as decisions from the BOJ, Fed and BOE come back-to-back-to-back in a 32-hour span starting early Wednesday in Japan (late Tuesday in the US).

Mechanically, the most-uncertain is the Bank of Japan, which hasn’t clearly signaled what it will do. The market is pricing in a 61% chance of a 10 basis point hike and a 39% chance of no move. If the BOJ disappoints, the recent strength in the yen could quickly unwind.

Next will be the Fed at 2 pm ET on Wednesday. The market is down to pricing in just a 5% chance of a cut after briefly flirting with a surprise move earlier this month. The big question is whether the Fed will signal a September move, or how aggressively it will be signalled. I tend to think they will be non-committal given all the data between now and September 18.

Finally, the Bank of England has left the market guessing with pricing now at 59% for a cut and 41% for a hold. It would be the first move of the cycle and run against some recent commentary from Bailey suggesting the UK inflation and wage dynamics are different from other advanced economies.

This article was written by Adam Button at www.forexlive.com.