Looking for action-packed forex events to trade this week? Well, we’ve got no less than three monetary policy statements lined up so make sure you’re ready with your strategies for these top-tier catalysts.
If you’re just tuning in and wondering why these central bank announcements are a big deal, then you should know that any changes to interest rates or asset purchases usually have a huge long-term impact on forex trends. Heck, even the slightest hints on potential easing or tightening tends to spur crazy moves!
So, without further ado, here are the upcoming policy statements and what most market analysts are expecting:
1. Bank of Canada (Sept 9, 2:00 pm GMT)
BOC Governor Poloz and his gang of policymakers are expected to keep interest rates on hold at 0.50% in this week’s monetary policy announcement, as the central bank already announced a 0.25% rate cut back in July to shield the Canadian economy from the effects of another oil price slump. That’s actually the second time that the BOC eased preemptively, cushioning the energy sector form suffering worse blows.
Since the Canadian central bank already cut rates twice this year, officials are likely to sit on their hands for the time being, waiting to see if their recent easing efforts are already doing the trick. Besides, crude oil has staged a pretty strong rebound in the last couple of weeks, which means that there might be no need for additional stimulus just yet.
Reassuring remarks from head honcho Poloz could spur more forex gains for the Loonie, which is already drawing a lot of support from rumors that OPEC might finally give in to curbing oil production. On the other hand, downbeat comments focusing on the dismal state of the country’s energy industry could force the Canadian dollar to retreat.
2. Reserve Bank of New Zealand (Sept 9, 9:00 pm GMT)
Next up, we’ve got the RBNZ interest rate decision, during which Governor Wheeler may announce a rate reduction from 3.00% to 2.75%. Keep in mind, however, that the RBNZ just cut interest rates in their previous policy statement but might need to ease again in order to boost economic activity in New Zealand.
If you’ve read my latest Monthly Economic Review for New Zealand, you’d know that trade activity, consumer sentiment, and business conditions have been worsening since June. Although the past two Global Dairy Trade auctions have printed gains in dairy prices, these aren’t even close to erasing the consecutive declines seen throughout the year. To top it off, the ongoing slowdown in China could spell gloomier prospects for New Zealand’s dairy industry in the next few months.
With that, an interest rate cut could push the Kiwi much lower against its forex rivals, especially the lower-yielding U.S. dollar and Japanese yen. Take note, though, that the July rate cut actually sparked short-term gains for the New Zealand dollar when this gave investors a bit of confidence that the country could recover sooner or later. Also, be on the lookout for a possible “buy the rumor, sell the news” situation since this rate cut has been priced in for quite some time.
3. Bank of England (Sept 10, 11:00 am GMT)
Last but certainly not least is the BOE interest rate statement towards the end of the week. No actual changes to interest rates and asset purchases are likely to be announced, but this event could still pack a punch since the monetary policy meeting minutes will also be released right there and then.
Recall that the previous MPC minutes revealed that only one dissenting policymaker, Ian McCafferty, voted to hike interest rates. This was a bit disappointing for those hardcore pound bulls who were expecting two to three policymakers to call for policy tightening, which explains why Cable and Guppy have been on a strong selloff mode these days.
Another 8-1 vote or a unanimous one in favor of keeping rates on hold could trigger more losses for the pound, as this would confirm that the BOE isn’t likely to tighten monetary policy anytime soon. On the flip side, an unlikely 2-7 or 3-6 vote and hawkish remarks from Governor Carney could spark a sudden rally since this would put the BOE neck-and-neck with the Fed in the rate hike race.
There you have it, ladies and gents! If you’re planning on trading any of these central bank events, just make sure you brace yourselves for additional volatility and adjust your risk accordingly. If you’re not comfortable trading around potential slippage or price gaps, there’s no shame in sitting on the sidelines and watching price action unfold instead. Good luck!