Looks like we’re in for more interesting price action with not one, not two, but FOUR interest rate decisions coming our way this week! What are markets expecting from the RBA, BOC, ECB, and BOE?
Reserve Bank of Australia
When: Tuesday, June 5, 4:30 am GMT
Expectations: 0.25% rate cut to 3.50%
Why it’s important: A month ago the RBA surprisingly cut its rates by a whopping 0.50%, which led analysts to believe that the central bank wouldn’t cut its rates for at least a few more months. But over the past couple of weeks we saw weakness in non-mining activities and falling house prices.
On the international front, escalating growth concerns in China, the U.S., and debt contagion issues in the euro zone are also threatening the commodity-related economy. And with inflation reports coming in softer-than-expected in May, it’s easy to see why analysts are now expecting the RBA to cut its rates by another 25 basis points.
Bank of Canada
When: Tuesday, June 5, 1:00 pm GMT
Expectations: Rates unchanged at 1.00% with a less hawkish tone by the BOC
Why it’s important: Market geeks are expecting the BOC to shed a few hawkish feathers this month as economic reports from Canada failed to meet expectations. Recall that the BOC hinted at interest rate hikes last month due to firm underlying inflation and reduced slack in the economy.
Since then, retail sales data and the IVEY PMI printed disappointing results, Canada’s economy only printed a 1.9% growth (against the estimated 2.5% growth), and the U.S. economy, Canada’s largest trading partner, has shown significant weaknesses. Not the best time to raise interest rates, don’t you think?
European Central Bank
When: Wednesday, June 6, 11:45 am GMT
Expectations: Rates unchanged at 1.00%, but watch for hints about more easing
Why it’s important: Market players all around the world are expecting some big words to come out of ECB President Mario Draghi‘s mouth in the central bank’s rate decision. While it’s unlikely that the ECB will pull the trigger on more stimulus before the Greek elections and the G20 meeting later this month, rumor has it that policymakers will start hinting about more easing.
With the recent string of weak economic data, the threat of a Grexit, and rising bond yields, the ECB is certainly coming under a lot of pressure to act. But will the European policymakers bite?
Bank of England (Monetary Policy Committee)
When: Thursday, June 7, 11:00 am GMT
Expectations: Rates unchanged at 0.50%, possible increase of 50B GBP in asset purchases
Why it’s important: The BOE has been getting calls to increase its asset purchase facility, but it has kept its hands in its pockets for 4 months now. Those who have been hoping for more stimulus (50 billion GBP worth!) believe that they’ll finally get their wishes granted this coming Thursday.
Now certainly seems as good a time as any! Remember, the BOE’s previous stimulus program just expired last month. And the most recent manufacturing PMI, retail sales, CPI, and GDP reports strengthen the case for more easing.
That’s it for me today! Anyone out there plannin’ on trading these reports? Remember, you can always sit on the sidelines and watch price action if you’re not sure on your strategy! In fact, why don’t you read Dr. Pipslow’s Top 4 Cases When You Should Sit on the Sidelines and see if you should?