Forex Trading Library

Weekly Market Outlook 2018-10-22

ECB and BoC monetary policy meeting

0 298

The economic data for the week ahead will be dominated by the central bank meetings. The European Central bank, the Bank of Canada and the Norges Bank will be holding their respective monetary policy meetings this week.

With the exception of Bank of Canada, the ECB and the Norges bank are expected to keep interest rates unchanged. Elsewhere on the economic front, it is a rather quiet week. However, data from the United States will stand out.

The U.S. is expected to release its advance GDP report on Friday for the third quarter of the year. Initial estimates show that the pace of economic momentum might have decreased compared to the second quarter.

Data from New Zealand will see the import/export prices coming out ahead of the RBNZ meeting and the third quarter GDP report due later in a few week’s time.

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

ECB expected to maintain the status quo

The European Central Bank’s monetary policy meeting is expected to be a non-event for this week. Interest rates are expected to remain unchanged, and the central bank is likely to stick to its baseline narrative.

This month will mark a cut back on the ECB’s bond purchases. Entering the final phase, the ECB will start purchasing bonds at a pace of 15 billion euro. The QE program is expected to end by December this year. Speculation is already rising about the timing of the interest rate hike in the Eurozone. However, officials are expected to give a guarded response.

Focus will also be on the ongoing trade wars between the U.S. and China and the potential fall out of the same.

U.S. advanced GDP report

The week ahead is expected to be busy for the U.S. dollar. The week starts off with flash manufacturing and services PMI reports from Markit. The data picks up steam with the release of the durable goods orders. Durable goods are expected to rise 0.4% on the month.

Data from the housing sector will also be in focus this week. New home sales are expected to fall 0.2%. There are cracks emerging in the housing sector amid rising interest rates. Following the new home sales report, pending home sales are due for later in the week.

The main data point for investors will be the advanced GDP report. Economists polled expect the U.S. economy to rise at a pace of 3.2% in the third quarter. This marks a somewhat slower pace of increase compared to the surge in activity in the second quarter.

Investors will be looking to the data and assessing it against the recent trade wars. Evidence of the trade wars impacting the U.S. economy could potentially spook the markets even more.

Bank of Canada set to hike interest rates

The Bank of Canada will be holding its monetary policy meeting this week. Economists polled widely expect the BoC to hike interest rates once again by 25 basis points. This brings Canada’s interest rates to 1.75%.

The hawkish expectations come amid a host of economic indicators suggesting that the Canadian economy is rising steadily. The recently released Business outlook survey showed that firms remained optimistic.

The latest inflation data however eased. On a month over month basis, Canada’s inflation fell 0.4% on the month. This was a bigger than expected decline and it pushed the yearly inflation rate to 2.2%, the lowest in four months.

Despite the disappointing data, the weaker pace of inflation is expected to ease pressure of the BoC officials. Still, this is not expected to change the BoC’s course of hiking rates this week.



Leave A Reply

Your email address will not be published.