Tuesday preview: BoJ expected to stand pat

In the seasonally quiet week in the run-up to Christmas, Tuesday sees the Bank of Japan deliver the main event from an economic point of view.

The Japanese central bank will reveal their monetary policy decision in the small hours, London time, but the market is not expecting this to pass with many noteworthy changes in terms of policy or outlook.

The sharply weaker yen against the US dollar in recent months has provided encouragement and breathing room for Japanese policy makers in their attempt to stimulate inflation and economic activity, with growth seeming stable for the time being and expected to pick up next year as the fiscal stimulus programme is implemented.

However, due to the thin volume of trades in the absence of many market players, forex traders could still see a lot of volatility in yen pairs.

"While the BoJ will welcome the current bout of USD strength, policymakers are unlikely to let down their guard," Rabobank's Jane Foley said, with any move by Trump towards protectionist trade policies impacting Japan both directly through its own trade relations with the US and indirectly given the impact on China.

"The market is expecting the BoJ to provide some clarity over its expectations for the shape of the yield curve, though there is a strong expectation that the BoJ will reiterate its policy of aiming to keep the yield on the 10 year JGB at 0%."

Craig Erlam at Oanda added: "With the Fed having raised rates and updated its outlook, the ECB cut bond buying but extended the deadline and the BoE in wait and see mode, we could see the yen pare some of these substantial losses in the coming weeks."

From a UK data perspective, the CBI Distributive Trades Survey is due at 1100 GMT, with a consensus forecast of slip to a sales balance of +20 from November’s 14-month high of +26.

Economists at Pantheon Macro expect the balance to fall to about +15, saying: "Rising inflation and slowing job gains likely has begun to sap growth in retail sales volumes of momentum."

For company watchers, cruise operator Carnival Corporation will report its fourth quarter financial results.

Analysts at UBS said they expect +3.5% in constant-currency yield versus the consensus 3.1% and company guidance of +3%.

"With roughly 28% of Q4 sailings in the Caribbean and 30% in Europe, we expect overall solid North American demand for Caribbean itineraries and European sourcing demand to largely offset softness in North American sourced demand for Europe," UBS said.

Analysts at the Swiss bank expect upbeat but conservative yield guidance for 2017, not expecting guidance to be more than a range of "up slightly" to perhaps 2% at the high end of initial guidance range, "and we believe investors understand that CCL management is conservative and that this would leave upside to that outlook".

Tuesday December 20
INTERIM DIVIDEND PAYMENT DATE
Creston, E2V Technologies, NB Distressed Debt Investment Fund Limited, NB Distressed Debt Investment Fund Limited Ext Shs, NB Distressed Debt Investment Fund Limited Red Ord

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Current Account (EU) (09:00)
Producer Price Index (GER) (07:00)

EGMS
Record

AGMS
DotDigital Group, Gfinity , JPMorgan Japanese Inv Trust, Schroder Income Growth Fund, Westmount Energy Ltd.

UK ECONOMIC ANNOUNCEMENTS
CBI Distributive Trades Surveys (11:00)