News traders, huddle up!
We’ve got three major central bank announcements that could spice things up in the forex arena this week.
Here’s what to expect from each event.
Reserve Bank of Australia (Dec. 6, 3:30 am GMT)
Governor Philip Lowe and his gang of policymakers are set to get the ball rolling in tomorrow’s Asian trading session by announcing the RBA decision. No actual interest rate changes are expected for the time being as the Australian economy seems to be fine and dandy, with the exception of its labor market.
In their policy statement last month, RBA officials sat on their hands and simply rehashed most of their remarks from earlier announcements. Market analysts suspect that the Australian central bank would stage yet another repeat performance, citing that “the economy is growing at a moderate rate,” as the “large decline in mining investment is being offset by growth in other areas, including residential construction, public demand and exports” and that “Part-time employment has been growing strongly, but employment growth overall has slowed.”
In that case, the RBA could reinforce the view that they would likely keep interest rates on hold at 1.50% for much longer, even as lower housing sector risks could give them room to ease if needed.
Bank of Canada (Dec. 7, 3:00 pm GMT)
Next up, the BOC will be sharing its economic outlook and monetary policy bias in the post-OPEC output deal world so market participants could be on the lookout for optimistic forecasts for the energy sector.
Heck, a few improvements in business conditions and sentiment were already seen even before the oil cartel pledged to stabilize the market by cutting production!
But just like Australia, Canada is also dealing with a surge in part-time hiring that doesn’t exactly paint a picture of a strong jobs market. This has weighed on consumer spending for the past few months and it doesn’t help that trade activity has lagged as well.
On a less downbeat note, the Canadian economy enjoyed a stronger than expected 0.3% monthly expansion in September, chalking up a 0.9% rebound for Q3.
In their October statement, BOC Governor Poloz made a slight downward revision to the country’s growth outlook, taking the slowdown in exports and housing activity into account. This time around, the central bank could factor in the potential impact of the OPEC decision in terms of business conditions, employment, and inflation.
European Central Bank (Dec. 8, 12:45 pm GMT)
Last but certainly not least is the ECB statement and press conference (1:30 pm GMT) which could turn the spotlight on the political developments in the region.
In earlier testimony, Draghi already hinted that geopolitical risks could be the main source of uncertainty in the months ahead and that they will assess their options during this December meeting to see how they can bring inflation closer to the target.
With that, some forex junkies are counting on an extension of the central bank’s QE program for another six months past the March 2017 end-date. After all, growth is expected to slow to 1.4% compared to 1.6% this year while inflation isn’t likely to hit the central bank target until 2019 so the eurozone could definitely use some help.
However, the ECB could still keep a lid on its asset-buying program at €80 billion a month to preserve its ammunition in case the situation worsens.
As it is, the outcome of the Italian referendum is already sending some jitters across the global markets as the call for constitutional reform was rejected and Prime Minister Renzi stepped down from his post. Early elections could be called, adding to the list of upcoming leadership changes in France, Germany, and the Netherlands next year.
To complicate matters more, Italy is dealing with banking troubles so officials could be on edge about another full-blown debt crisis in the euro zone’s third-largest economy, no less.
Depending on Draghi’s mood on Thursday, he could still attempt to reassure markets and inject a bit more confidence in the economy’s ability to face these headwinds. Either way, don’t forget to make adjustments on your euro positions if you’re keeping ’em open during the announcement and presser!