FX Week Ahead: April BoC meeting and inflation data

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April BoC meeting

The markets were witness to another week of volatility with various themes playing out. The uncertainty surrounding trade wars finally eased after the Chinese Premier was seen softening his stand last week in a speech where he promised to open the doors to China’s markets.

The week ahead will continue to see the volatility especially in Syria and the Middle-East. Commodity markets are likely to react to the developing news. On the economic front, the week ahead will see the central bank meeting from the Bank of Canada. No changes to interest rates are expected at this week’s event.

Inflation will remain the main theme of the week as various economies will be releasing the inflation report. New Zealand will be reporting on its first quarter inflation data this week, which will likely shed more insight into how consumer prices behaved during the first three months of the year.

Elsewhere, monthly jobs report from Australia will also garner attention. The Australian unemployment rate is expected to fall to 5.5% from 5.6% previously while the monthly employment change is expected to show a 20k print on the jobs added.

Here’s a quick recap of the key economic events due this week.

UK Inflation data and jobs report

The markets will be looking to the fresh inflation and jobs data that will be released from the UK this week. The data covers the period of March as far as consumer prices are concerned. Both the data points will be closely watched as investors adjust their odds for the proposed rate hike from the Bank of England in May.

The UK’s headline inflation is expected to slow even further, rising at a pace of just 0.3% on the month. This is expected to bring the annual headline inflation to 2.7%, unchanged from the previous print.

Core inflation which excludes food and energy prices are expected to remain steady at 2.4% posting the same pace of increase as the month before. Ahead of the inflation data, the monthly labor market report will be released.

Economists forecast that wage growth including bonuses is expected to accelerate 2.9% on the year ending March. This marks a slight increase from 2.8% in the previous month.

An increase in wage growth will be a welcome change. The UK’s unemployment rate is expected to remain steady at 4.3%. Other data over the week includes the monthly retail sales report.

BoC expected to hold rates steady at 1.25%

The economic calendar for the week ahead will see the Bank of Canada’s monetary policy meeting standing out among the headlines. It is quite likely that the week ahead will be a busy one for the Canadian dollar.

The April BoC meeting is scheduled for Wednesday this week. A few weeks ago the Bank of Canada released its business outlook survey. The survey showed that business sentiment continued to improve with healthy sales prospects.

Almost all the forward looking indicators were seen to be positive across different regions and sectors. However, the uncertainty from the trade talks and the global trade environment continues to cast a shadow. The BoC is likely to remain on the sidelines at this week’s meeting, meaning that interest rates will remain unchanged from last months 1.25%.

The April BoC meeting is also likely to toe the line and cite the downside risks from the trade policies from the U.S. administration.

On the economic front, ahead of the April BoC meeting, the manufacturing sales data will be coming out followed by Friday’s release of inflation figures. Canada’s consumer prices have been steadily rising at a pace of 0.6% – 0.7% over the past few months and this trend is expected to hold.

Retail sales report will also be released on Friday.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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