A Week in the Market: Bank of Canada and the Weakening Dollar (23-27 January)
This week, the focus will be on the Bank of Canada rate hike and inflation statistics from Europe and Australia.
The Bank of Canada might raise its rate by 25 basis points from 4.25% to 4.5% on Wednesday. The projected increase will come in line with expectations and could push the Canadian dollar into a new wave of appreciation. This is likely to be the last rate hike in the Canadian monetary policy tightening cycle.
A batch of probably disappointing statistics will put pressure on the already falling US dollar. Durable goods orders and GDP for the fourth quarter are expected to be released – the figures might fall short of expectations. S&P Global PMI data will be presented on Tuesday, which already points to a potential decline in the January business activity.
The European Central Bank is promising a 50 basis points rate hike from 2.5% to 3% at its upcoming meeting. In addition, the focus will be on the release of Germany's January Ifo business climate index and a speech by ECB President Christine Lagarde.
Positive surprises in the release of UK data could help the UK pound to consolidate above the current high, from which a pullback in a downtrend has so far been observed. On Tuesday, the market will see values from the manufacturing and service sector business activity index, with slight deviations from previous figures expected.
The quarterly consumer price index data will be released on Wednesday. With Australia still struggling with inflation, the weighted average consumer price index for November could rise again. This will push the Bank of Australia into another rate hike of 25 basis points as early as February.