A number of key fundamentals are set for release on Wednesday. What’s on the calendar, and how might it affect the markets?
Bank of Canada Monetary Policy Report and Rate Decision
The Bank of Canada is set to reveal its latest interest rate decision and the report that accompanies it. Consensus forecasts no change, with expectations that the rate will remain at 1.00%. Growth has been stable but low in Canada as of late, and a number of key fundamental releases have missed expectations. Maintaining a low interest rate, therefore, is key to ensuring a sustainable interest in output, alongside a weak CAD to keep exports cheap.
Having said this, a number of leading Canadian economists have recently suggested the Bank of Canada should look to tighten its policy in the not to distant future. Look for a hawkish tone in the statement to strengthen the CAD, on a validation of this bias. Conversely, a dovish tone will likely weaken the CAD against its major counterparts.
Federal Reserve Chair Janet Yellen Speaks
A little later on in the day, Federal Reserve Chair Janet Yellen will take the stage at the Economic Club of New York. Each time she speaks traders look for hints at the future of US monetary policy, and this time around will be no different. She recently dampened expectations of a pending rate hike with the release of dovish monetary policy meeting minutes, but these expectations renewed as inflation data beat expectations on Tuesday. Combined with Wednesday’s better than expected industrial production release, a hawkish tone could serve up some considerable upside volatility in the major USD pairs. Conversely, a dovish tone, one that alludes to the Federal Reserve overlooking economic data in the medium term, would likely weaken the USD against its major counterparts.
As ever, be aware that both of the aforementioned releases will likely move the markets, and expect some choppy price action in the respective pairs around the time of release. Trade carefully with string risk management parameters in place.
To contact the reporter of this story: Samuel Rae at Samuel@forexminute.com