Central banks across the globe have been extremely busy this week. Japan’s fiscal stimulus announcement disappointed, the Reserve Bank of Australia cut rates to record lows and the Bank of England are forecast to also slash theirs tomorrow afternoon. Firstly, Japan’s government has announced 4.6 trillion Yen ($45 billion) in extra spending during the current fiscal year, as part of the 28 trillion Yen stimulus package that Prime Minister Shinzo Abe flagged in last week’s speech. The Yen climbed to a three week high after the spending details were released. The RBA cut its benchmark rate by 25 basis points to a record low of 1.5%, the Aussie Dollar initially depreciated before retracing back higher and ending 0.2% higher after the release. Finally, the BoE are expected to cut rates tomorrow and potentially add additional stimulus measures as well.
Yesterday’s economic docket was relatively quiet, with the only high tier data release in the European session being UK Construction PMI. Although the reading was higher than expected at 45.9, it still marks the lowest level seen since July 2009. The data signaled a further downturn in UK Construction output as the sector posted consecutive contractionary readings.
Today we have a host of PMI data releases from the UK, US and Eurozone. The service sector figures are expected to remain constant in the US and the single currency zone. The main interest for the markets will be on the UK, as the tertiary sector accounts for around 80% of the GDP figure. The figure is due to remain at the 47.4 mark as previously seen and in contraction territory. If the reading drops further the BoE may feel the need to intervene and implement some further stimulus into the UK economy this Thursday.