Weekly Market Outlook: RBA, BoC and ECB Meetings

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The week ahead will see central bank meetings from the Reserve Bank of Australia and the Bank of Canada. Both the central banks are expected to leave interest rates unchanged.

On the economic front, the fourth quarter GDP results from Australia will be coming out a day later. The data is likely to overshadow the RBA’s meeting. Following the release of the GDP figures, the January retail sales numbers will be coming out later in the week.

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The European Central Bank will also be meeting on Thursday this week. Investors will be focusing on the monetary policy statement from the central bank. The prospects of a dovish message from the ECB is likely on the cards.

On Friday, the US and Canada’s monthly labor market statistics will be coming out. The central banks of both the economies have moved to a period of holding interest rates steady after hiking them over the past few months.

Upbeat figures from both ends could, however, bring back the speculation of a rate hike in future monetary policy meetings.

Here’s a quick recap of what’s to come in the currency markets this week.

Bank of Canada seen holding rates steady

The Bank of Canada will be holding its monetary policy meeting this week on Wednesday. The BoC held interest rates unchanged at its previous meeting in January. Canada’s interest rates stand at 1.75%. At the January meeting, the BoC noted that it was still on a tightening cycle, but that rate hikes would be data-dependent.

Over the week, data showed that Canada’s inflation, measured by the Bank of Canada was steady at 2.0%. However, headline inflation was seen easing slightly below 2.0%.

Last week also showed the release of the quarterly GDP data. Reports from Statistics Canada showed that Canadian GDP increased 0.1% on the quarter in December. This put the annualized pace of GDP growth to just 0.4%. This was the lowest increase in GDP in nearly two years.

The retail sales figures for January will be coming out as well this week. Just a few weeks ago, the December retail sales report showed a strong decline in activity in December. Investors will be looking for evidence of whether this slowdown will be prolonged and stretched into January as well.

ECB could take a dovish turn

The European Central bank will be holding its monetary policy meeting this week. This will see the central bank releasing its quarterly growth outlook projections. The central bank had already lowered the growth prospects for Germany as well as for the whole of eurozone.

Economic data covering January showed that the momentum had eased significantly. This led to the ECB official Couere talking about the central bank introducing the targeted long term financing operations for European banks.

Investors will be looking for further clues on what the next ECB action will be. This comes after the central bank ended its bond purchase program in December. While initial speculation was that the bank would raise rates during the second half of the year, weaker economic data has postponed the expectations to next year.

For the moment, we can expect the ECB to remain cautious. While it maintains that it will seek to use short term financing, it is unlikely that this would happen at this week’s meeting.

The outcome will most likely push the decision to the June ECB meeting. By then, the policymakers would have enough data to take a more concrete decision, while at the same time, hoping to see a recovery in the eurozone.

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