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© Reuters. The sun sets behind the skyline and the European Central Bank (ECB, R) during a warm autumn evening in Frankfurt, Germany, October 1, 2023. REUTERS/Kai Pfaffenbach/File Photo
LONDON (Reuters) – Big central banks are kicking off their first meetings of 2024 with the Bank of Japan and European Central Bank gathering in coming days, while in emerging markets Turkey takes center stage.
Earnings season and a snapshot of how business activity is holding up in January as turmoil in the Red Sea wreaks havoc on supply chains are also due.
Here’s a look at the week ahead in world markets from Kevin Buckland in Tokyo, Yoruk Bahceli in Amsterdam, Lewis Krauskopf in New York, Amanda Cooper in London and Ezgi Erkoyun in Istanbul.
1/ ECB VS MARKETS
The ECB meets on Thursday and for all the pushback against rate-cut speculation, traders have merely delayed bets on a first move by a month to April. Markets still expect five cuts this year.
Policymakers are in no hurry to signal cuts and even some doves say it’s too early to discuss them. Expect more pushback from ECB boss Christine Lagarde, who warned traders pricing too many cuts would not help the ECB fight inflation.
Euro zone inflation rose in December and wage growth is still too high for its liking. While it’s too early for a pivot, the ECB has halted rate hikes and clarified how it will wind down its pandemic-era bond-buying scheme.
And Lagarde could be pushed on the impact of supply chain disruptions in the Red Sea on inflation.
2/ BATTERED YEN BULLS
Just how much the frenzy for an imminent end to Bank of Japan stimulus has quickly become a frustration is playing out in currency markets.
The yen has tumbled as much as 5.6% this month alone to beyond 148 per dollar. That move has happened more quickly than December’s yen bounce to five-month peaks near 140 from a more than one-year trough near 152 in mid-November.
A New Year’s Day earthquake on Japan’s west coast cleared any vestigial bets for an exit from negative rates at the BOJ’s two-day meeting starting on Monday.
Those wagers had already been tempered by dovish BOJ commentary, while recent data suggests a cooling of inflation without any central bank assistance.
Dollar/yen’s approach to 150 could trigger some jawboning from Tokyo. A weak yen is unpopular with voters, who already take a poor view of Prime Minister Fumio Kishida’s administration.
3/ PUSH AND PULL
As some Federal Reserve policymakers push back on market rate-cut bets, a key U.S. inflation gauge on Thursday should shed some light on the timing of such a move.
December’s personal consumption expenditures (PCE) reading comes after the price index increased 2.6% in the 12 months to November and monthly prices fell for the first time in more than 3-1/2 years.