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On Tuesday, the Reserve Bank of Australia (RBA) will announce its much-awaited decision on interest rates. With Australia still in bad shape after the floods, markets expect RBA Governor Glenn Stevens to keep to his promise and hold interest rates at 4.75% at the next cash rate announcement.

But I have my doubts. The thing is, you really never know with the RBA… One moment they’re dovish, but before you could say “Down, Aussie, down!” they’ve turned hawkish!

In catering to the world’s increasing demand for coal and ore, Australia is currently in the middle of its largest mining investment boom in almost a hundred years. In fact, the mining boom was one of the main reasons why the RBA decided to hike the cash rate seven times from October 2009 to November 2010.

Then, last week, the Australian Bureau of Statistics showed that total hourly wages rose 1% in the final quarter of 2010. Overall, it translated to a 3.9% increase in wages year-on-year. That’s pretty big and could put upward pressure on the bank’s inflation expectations.

In any case, closely monitor the RBA’s interest rate decision. If they do hike rates, we may see the Aussie take out its year-to-date highs at 1.0200…

Bank of Canada

Later on in the day, the Bank of Canada (BOC) will release its own interest rate decision. Recall that in October 2010, the BOC put a stopper to its consecutive rate hikes on grounds of currency tensions and an unstable economic outlook.

This time around, interest rate hike junkies aren’t keeping their fingers crossed. For one, inflationary pressures in Canada remain muted with headline CPI figures missing expectations at 1.4% in January.

Aside from the slack in the economy and the strength of the Loonie, I have a feeling that tensions in the Middle East aren’t helping either! If you’ve been attending class at the School of Pipsology, you’d know that the Loonie is highly correlated with oil prices.

With oil on the rise, the Canadian dollar could stand to benefit in the short-term. However, if this happens, it would make purchasing Canadian goods more expensive, which in turn could hurt Canada’s export industries.

Still, keep your eyes glued to the tube for the accompanying statement of the BOC. Analysts expect a rate hike around May this year, pointing to some of the positive economic data that has been popping up in the U.S., Canada’s largest trading partner.

European Central bank

Come Friday, ECB President Jean-Claude Trichet will take center stage and announce the bank’s interest rate decision.

You’ve already heard from Pip Diddy that part of the reason why the euro has been showing a lot of swagger on the charts lately is that a few market groupies are getting giddy at the prospect of a rate hike. And looking at the data, I can’t exactly blame them for going gaga over the ECB!

January’s CPI report showed that consumer prices had increased at a faster pace, printing a 2.4% growth against its December figure of 2.2%.

Hyping up the euro bulls even further are the remarks of ECB members, saying that the central bank may start to consider shifting to a tighter monetary policy soon to balance the rising prices of commodities.

So is a rate hike really in the cards?

Maybe soon, but not on Friday. I think that the ECB will have to factor in the effect of higher borrowing costs on the region’s growth. Remember that in the fourth quarter of 2010 Germany’s growth slowed to 0.4% after expanding by 0.7% in the third quarter, while the region’s overall growth just remained steady at 0.3%.

But don’t fret euro bulls! As hinted by ECB member Yves Mersch, the central bank may sound more hawkish this time around given the recent surge in oil prices. So keep an ear out for hints on when the ECB could raise rates!