Five Central Bank Meetings Next Week (page 2 of 2)

Look for more signs of stronger growth and hawkish comments to continue to fuel gains in the Euro.

British Pound

After yesterday's strong rally, the British pound extended its gains today thanks to a sharp rise in the service sector PMI report. The index jumped from 57.0 to 58.9, which follows yesterday's strong construction sector PMI report. Despite the stronger data though, most of the gains are really attributed to dollar weakness rather than pound strength.

Although the highlight next week is the Bank of England rate decision. The fact that the BoE is not expected to make any moves and because they do not make any comments when leave rates unchanged, the market may choose to focus more on the other pieces of data due out next week. We are expecting the BRC retail sales report, industrial production and trade balance for the month of January.

Japanese Yen

Mixed economic data released last night caused some traders to worry about when the Bank of Japan may actually be dropping their quantitative easing policy. Even though core national CPI came in stronger than expected in the month of January, growth in consumer prices in Tokyo for February was slower than expected.

Household spending also took a surprisingly sharp dive while the jobless rate edged higher. The market was really looking for strength across the board and the fact that the data failed to deliver prompted a strong sell-off in the Japanese Yen. This has pushed expectations for an interest rate hike out to April instead of March. Tighter monetary policy however is inevitable, so this rally in USD/JPY could be nothing more than a retracement.