Central financial institution communicate will take a chill capsule this week with solely the BOC underneath the highlight. However that doesn’t imply we received’t see volatility!
Merchants will take note of top-tier experiences just like the U.S. GDP and core PCE in addition to manufacturing and providers PMIs all over the world for clues on world progress tendencies.
Earlier than all that, ICYMI, I’ve written a fast recap of the market themes that pushed forex pairs round final week. Verify it!
And now for the closely-watched potential market movers this week:
Main Financial Occasions:
BOC’s final price hike? (Jan 25, 3:00 pm GMT) – After a dovish shift from “rate of interest might want to rise additional” in October to “Governing Council will likely be contemplating whether or not the coverage rate of interest must rise additional” in December, markets expect the Financial institution of Canada (BOC) to lift its rates of interest by a smaller 25 foundation factors to 4.50%.
A 4.50% rate of interest would mark the best since 2007. However with BOC sharing that “worth pressures could also be shedding momentum” and that “progress will primarily stall” in 2023, Governor Tiff Macklem and his group will doubtless pause from additional price hikes till additional discover.
Will merchants learn “pause” and get “final price hike for 2023?” Watch BOC’s assertion for the members’ standards for additional price hikes this yr. If the central financial institution focuses on the draw back influence of additional tightening, then we may see CAD lose pips towards its main counterparts.
US advance GDP (Jan 26, 1:30 pm GMT) – Final week’s retail gross sales and manufacturing numbers solid doubts on a “gentle touchdown” for Uncle Sam. The economic system is now anticipated to have grown by an annualized 2.6%, slower than the three.2% progress seen in Q3.
Preserve shut tabs on the small print of the report! Shopper spending, for instance, factored in October’s progress. GDP that’s propped up by greater imports and stock can also be not excellent news as they level to decrease home demand.
In case the GDP report seems to be a non-mover, then possibly the sturdy items, preliminary jobless claims, and new dwelling gross sales knowledge scheduled in the identical buying and selling session may function intraday catalysts.
US core PCE worth index (Jan 27, 1:30 pm GMT) – No Fed communicate? No drawback! The Fed’s most popular inflation gauge is predicted to have maintained its 0.2% progress in December.
A lower-than-expected price would help decrease readings within the headline shopper and producer worth indices and encourage “peak inflation” narratives.
World PMIs (Jan 24) – This week’s parade of producing and providers PMIs ought to give us a clearer image of worldwide progress tendencies.
Additional slowdowns in Australia’s PMIs (Jan 23, 10:00 pm GMT) may set the tone for CPI expectations later within the week and subsequent month’s RBA resolution.
In the meantime, a bounce in providers and softer contraction within the manufacturing PMIs in January would level to stabilizing situations in France, Germany, and the Eurozone.
The U.Ok. is predicted to indicate combined outcomes, with manufacturing exhibiting much less contraction whereas providers decelerate a bit after December’s progress.
Final however not the least is the U.S., which is predicted to print enhancements in each the manufacturing and providers sectors from December to January.
Foreign exchange Setup of the Week: USD/CAD
With the BOC underneath the highlight and the U.S. printing GDP and shopper worth experiences, you’ll be able to guess that I’m watching USD/CAD this week!
The pair is about to hit the 1.3350 zone that has been holding as help all month. As you’ll be able to see, 1.3350 will be thought of the underside of a 350-pip vary that’s been round since late November.
The wicks on the final 4-hour candlesticks and Stochastic about to hit “oversold” territory recommend that the promoting momentum may quickly lose floor.
However will USD/CAD really bounce from the vary help?
Expectations of a “ultimate” price hike from BOC or indicators of solely a gentle touchdown for Uncle Sam may push USD greater towards CAD.
USD/CAD may bounce from its present ranges and check the mid-range zone close to 1.3500 or the vary resistance ranges nearer to 1.3700.
But when traders deal with the pro-risk, anti-USD market themes, then USD/CAD could lengthen its bearish momentum.
USD/CAD may drop all the way down to 1.3300 and even the 1.3250 lows earlier than seeing sustained shopping for stress.