Whoa! It looks like we’re in for an action-packed week on the charts with FOUR interest rate announcements on tap!
What are you waiting for? Get a sneak peek at what we’ll be hearing from central bankers!
Reserve Bank of Australia
First to take the stand will be the Reserve Bank of Australia (RBA) on Tuesday at 3:30 am GMT.
If you remember, prior to November, our mates in the Land Down Under had been keeping rates steady at 4.50% for six months straight.
The central bank then surprised markets when it hiked interest rates by 25 basis points to 4.75% last month. They finally felt that their economy was doing well enough, so why not take a shot at taming inflation?But with a handful of economic data pointing to cooling growth, economic gurus think that RBA Governor Glenn Stevens won’t be as giddy as he was when he delivers the monetary policy committee’s verdict on the cash rate next week.
Just this Thursday we saw that consumer spending was still sluggish, with the retail sales report for October printing a 1.1% decline to follow the 0.1% uptick we saw in September. Also, the GDP report for the third quarter showed the slowest pace of growth in almost two years at 0.2%.
Yikes! If these economic hotshots are right, we may just see AUD/USD continue its trip down the charts!
Bank of Canada
Also next week, Canada will be making its own interest rate statement. As you know, for the first time in four months, the Bank of Canada (BOC) decided to halt its rate hikes in November.
Why’d they spoil the fun? Well, even though the economy has been showing signs of recovery domestically, Canada’s trade is still showing signs of weakness. After all, its largest trade partner, the U.S., is still going through tough times and has decided to take on further quantitative easing.
Adding to that, the BOC has said in the past that it doesn’t want its rates to move too far away from the U.S.’s lowly rates.
For these reasons, almost every analyst out there believes the central bank will hold back from increasing rates before the end of the year. “It’ll stay at 1.00%!” they shout in unison. But the jury is still out as to when we’ll see the next rate hike.
That being said, a rate hike on Tuesday would come as a huge surprise and could send USD/CAD sharply lower. You don’t wanna miss out, do you? Catch the decision at 2:00 pm GMT!
Reserve Bank of New Zealand
Come Wednesday, we’ll be treated to the Reserve Bank of New Zealand‘s cash rate decision.
If you recall, it decided to hold rates steady at 3.00% last month. Actually, if you look back at 2010, you’ll see the central bank only raised rates twice this year… And according to forecasts, it’ll end at that!
New Zealand’s interest rates will probably stay flat at 3.00% for the rest of 2010 because its economic recovery has been weak and unconvincing. In fact, some economists say we won’t see a rate hike until June 2011. With inflation expectations falling, can you really blame them for thinking that?
Anyway, be sure to tune in at 8:00 pm GMT just in case an unexpected rate hike takes place!
Bank of England
It looks like the pound is set to crash the com-doll central bank party next week! When the com-doll banks are done with their respective rate statements, the Bank of England (BOE) will take center stage on Thursday at 12:00 pm GMT as Governor Mervyn King announces its monetary policy decision.
All the King’s horses and all the King’s men are expected to keep the BOE’s asset purchase facility at 200 billion GBP while holding the benchmark rate steady at 0.5%.
Their upcoming monetary policy decision will most likely be the same as the one before, and the one before that, and the one before that… No surprises there!
But don’t get me wrong, it’s not as simple as it sounds. Some monetary policy members, such as Adam Posen, have been strongly against the BOE’s recent policy decisions. They also started criticizing King for compromising the central bank’s independence and credibility by showing political bias.
Traders are probably at the edge of their seats waiting to see King’s reaction to this issue and whether he’d give in to the pressure to step down. Now that makes things a little more exciting, doesn’t it?
Unless you’ve been cutting classes in our School of Pipsology, I’m sure you know how much these monetary policy decisions could affect price action.
After all, central banks are responsible for steering their respective economies towards the direction of economic growth. Bear in mind that hawkish statements are generally bullish for a currency while dovish statements are typically bearish for a currency.