A day that's expected to affirm the U.S. consumer's strength could also begin with a step into uncharted unconventional policy by the nation whose demographic trends may serve as an early warning signal of what awaits other advanced economies.
"Tomorrow could be among the most challenging sessions of the third quarter," writes Marc Chandler, head of currency strategy at Brown Brothers Harriman & Co. "The focus is primarily on Japan and Europe, but the U.S. reports its first estimate of second-quarter GDP."
Investors will have a lot on their plates to digest, with a Bank of Japan meeting, the results of stress tests on European banks, as well as new growth figures for the euro area and North America all scheduled to be released.
Analysts at HSBC Holdings Plc in a report on Thursday, citing "high" expectations for the Bank of Japan meeting, see three scenarios: disappointment (causing a sharp weakening in the yen relative to the U.S. dollar in the short-term), greater monetary stimulus (a strong yen in the short-term) and helicopter money.
The analysts write: "For the first two scenarios we would expect the medium term impact on USDJPY to be limited, although the short-term reaction would likely be different". Only helicopter money — a permanent addition to the monetary base — would deliver a weaker yen in the medium-term, they say.
"We still expect the BOJ to cut rates and increase the pace of asset buying modestly," Societe Generale SA analysts write, adding that markets would be "disappointed" if Japan's central bank withheld its monetary firepower.
Brunello Rosa, analyst at Roubini Global Economics, foresees a 10 basis point cut in the deposit rate to minus 20bps, accompanied by asset purchases and policies to ease the pressure on banks grappling with low net interest margins. Rosa writes: "In our view, increases in asset purchases at this stage would likely be limited to risky assets (mainly exchange-traded funds), with increased Japanese government bond purchases an upside risk to accompany the recently announced 28 trillion yen fiscal stimulus boost."
Capping off a big week for the global economy — following the Federal Reserve and BOJ meeting — the European Banking Authority will announce the results of its stress tests on Friday evening, 9pm London time, which is expected to shed light on non-performing loans at Italian lenders.
Separately, annual headline inflation in the euro zone for June is expected to tick into positive territory for the first time since January, notes Brown Brothers Harriman & Co.'s Chandler, and the first estimate of second-quarter GDP growth for the euro area is also due out. The rate of expansion is expected to moderate to 0.3 percent quarter-over-quarter from 0.6 percent in the first three months of the year.
The U.S. consumer is poised to post its best rate of growth in over a decade, but data released on Wednesday give cause to temper expectations on how much headline growth will accelerate.
Following the release of the Census Bureau's advance economic indicators report, the Atlanta Fed GDPNow forecast for second-quarter growth tumbled by half a percentage point to 1.8 percent. The consensus estimate among economists surveyed by Bloomberg is for annualized quarter-over-quarter growth of 2.6 percent.
While the initial print has been subject to heavy revisions, it's the release that tends to move markets the most.
Meanwhile, America's neighbor to the north is slated to report GDP growth for the month of May, with analysts expecting Canada's economy to show a monthly contraction of 0.5 percent as wildfires began to wreak havoc in oil-producing regions of Alberta.