The week ahead is eventful. The key issue is whether the events will be sufficient to either significantly change our information set, or inject fresh volatility into the foreign exchange market. While market participants face headline risk around the events, we suspect that, at the end of next week, the investment climate is unlikely to change.
Fed tapering continues at a $10 bln a meeting pace, as the economy is behaving largely in line with the FOMC’s expectations, though the weakness in the housing market is genuinely disappointing. It is generally accepted that the first Fed hike is still more than a year off. The next FOMC meeting (June) will be more important than this week’s meeting, which may be as close to a non-event as these things can be. Forecasts will be updated, and Yellen will hold a press conference June.