The Reserve Bank of Australia met earlier this week and opted to leave interest rates unchanged at a record low of 2.5%. That has helped the iShares MSCI Australia ETF (NYSEArca: EWA) build a weekly gain of almost 5.2%. The Bank of Canada concluded its policy meeting today, leaving rates unchanged at 1%, news that helped the loonie and the iShares Canada ETF (NYSEArca: EWC) gain some strength.
However, those are not the only important central bank meetings traders and investors should be focusing on this week. Thursday alone is chock full of important developed market central bank commentary as the Bank of Japan, Bank of England and European Central Bank conclude meetings.
Surprises are not expected out of BoJ, though it should be noted that the recent series of economic data out of Japan has been strong enough to help weaken the yen and send the WisdomTree Japan Hedged Equtiy Fund (NYSEArca: DXJ) higher by more than 4% in the past five days. After investors pulled billions of dollars out if U.S. equity ETFs last month, DXJ and the rival iShares MSCI Japan ETF (NYSEArca: EWJ) are now the top-two asset-gathering ETFs this year. [Global ETFs See Record Outflow]
With Japanese interest rates essentially negative in real terms and the size of BoJ’s easing program already massive, the central bank does not have a lot of room with which to surprise markets. Still, the weaker yen has boosted Japanese stocks this year, meaning Japan equity bulls are craving more support from BoJ. [WisdomTree: Yen Weakness Flowing to The Bottom Line]
The Bank of England, like BoJ, is not expected to provide any surprises. Even if that proves to be the case, the British pound has been one of the best-performing G10 currencies against the dollar this year and part of the reason may be that markets do not believe new BoE Governor Mark Carney’s commitment to keeping interest rates low.