Market Insights Podcast – BOJ and ECB in the focus with US PCE inflation

OANDA Senior Market Analyst Kelvin Wong joins Jonny Hart to discuss this week’s key economic data and events; another horrendous start of the week for China and the Hong Kong stock markets, as they continued to plummet with the Hang Seng China Enterprises Index that recorded a daily loss of -2.44%, edging closer to almost a two-decade low. Market participants seem to be getting impatient with Chinese top policymakers in terms of the current pace and magnitude of stimulus measures to address the heightened deflationary risk spiral in China.

A preview of two key monetary policy decision outcomes; Bank of Japan (BoJ) is expected to hold steady its short-term negative interest rate at -0.1% for now on Tuesday, 23 January but likely lay the groundwork for its removal in April via forward guidance. The European Central Bank (ECB) is likely not to cut its benchmark policy rate when it meets on Thursday, 25 January as ECB President Lagarde has signaled in Davos the first cut may come in the summer months of 2024. Rounding up, US PCE inflation (December) will be out on Friday, 26 January, a continuation of inflationary deceleration in core PCE especially in the services component is likely to keep the Fed’s dovish pivot narrative alive.

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