After the drama that ensued following last week’s ECB rate decision, attention will be focused on the US Federal Reserve and the Bank of Japan.

Markets are not expecting the Fed to raise interest rates this month especially considering the impact the last increase has had on markets in 2016. The BoJ’s Governor, Haruhiko Kuroda, is known to be fond of surprising markets with monetary policy decisions but investors are not expecting an expansion of monetary policy from this week’s meeting.

A number of positive data points for the US economy in recent weeks have eased talk of an imminent recession in and put further Fed rate hikes firmly back on the table but Mizuho Corporate Global’s Harry Coolidge remains skeptical.

“The data that really matters, industrial production, retail sales, durable goods, ISM, housing still point to slowing growth and that can’t be ignored,” he said. “Japan’s economy remains a basket case with negative interest rates, an eye-popping quantitative easing program and an inflation rate that stubbornly refuses to increase. They’ve thrown everything but the kitchen sink at the economy and it’s still going nowhere.

Despite downplaying the chance of market-moving policy decisions, Mizuho Corporate Global says it is watching the BoJ closely for hints on the future course of its QE program.

“Negative rates have had the opposite effect with the yen strengthening against the US dollar so it looks as if QE is the only show in town as far as they’re concerned. That will be good for stocks which are sure to rise if and when the expansion of the program is announced,” concluded Coolidge.


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