The U.S. Federal Reserve and the Bank of Japan showed the two sides of central bank action this week. The Fed's Federal Open Market Committee ended with no change to the U.S. benchmark interest rate. The lone dissenter was once again Federal Reserve Bank of Kansas City President Esther George.
The European Central Bank held interest rates and its quantitive easing on hold as expected on Thursday, July 21. The euro was weaker against major pairs after there was not clear signal on what the next step for the central bank is despite the anticipated negative effect of the Brexit vote on European growth by forecasters. Earlier in the week the German ZEW was a portent of things to come with a -6.8 confidence in the German economy for the next 6 months. For the full Eurozone the index was -14.7.
U.S. employment data provided direction to investors who are still anxious about the referendum vote by Britain to leave the European Union. The U.S. added 287,000 jobs, the highest number since October and a shot in the arm for jobs data after the disappointment of the May non farm payrolls report.
Central banks will take the spotlight as the U.S. Federal Reserve, Bank of Japan, Bank of England and the Swiss National Bank will publish monetary policy decisions. The market anticipates no changes across the board, but is expecting some of the rhetoric to fill the void of monetary policy actions. The next few weeks will be full of economic events and with uncertain outcomes volatility is forecasted to rise.