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Weekly Market Outlook: BoC, BoJ and Fed meetings

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The week ahead will see a pickup in activity. The economic calendar stands out with the Bank of Canada and the Federal Reserve due to hold their respective monetary policy meetings.

On the economic front, there is plenty of data to keep traders busy. Australia will be coming out with the third quarter inflation report. The data on inflation continues later in the week, with the Eurozone releasing the flash inflation estimates for October.

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On the monetary policy front, the Bank of Canada, Bank of Japan and the Federal Reserve will be holding their respective monetary policy meetings. Among the three, investors are almost certain that the Fed will cut rates this week.

The outlier remains the monetary policy decision from Japan. The BoJ has been hinting at further policy easing. But with the October sales tax just coming into effect, it could buy the central bank some more time.

Here’s a brief look at the key economic events coming up for the week ahead.

Expect a Busy Week for the USD

The economic calendar for the United States is quite busy. Besides the Fed meeting, a number of economic reports are also due over the week. This includes the high impact jobs report and the ISM’s manufacturing PMI numbers due on Friday.

Investors Expect a Quarter Point Cut

The Fed funds rate is likely to be lowered by a quarter basis point this week. The CME Group’s Fed Watch tool has a 94% probability for a rate cut. This would bring the Fed funds rate down to 1.50% – 1.75%.

This week’s rate cut, if the Fed follows through, will mark the third cut to interest rates this year. The pace of rate cuts is rapid. The Fed began cutting rates by initially noting that it was just a mid-cycle correction.

GDP, ISM, Nonfarm Payrolls

A number of economic reports are also due this week for the USD. It starts with the advance GDP report that is due out on Wednesday. The GDP data comes a few hours ahead of the FOMC meeting.

The US economy is set to slow in the third quarter. Economists forecast that the GDP will rise just 1.5% – 1.8% during the period. It marks a slower pace of increase comparing to the 2.0% increase in GDP in the second quarter.

On Friday, the Institute of Supply Management (ISM) will be coming out with the monthly manufacturing PMI. Manufacturing activity is contracting for two consecutive months now.

The payrolls report will also keep volatility alive. Investors expect the unemployment rate to slightly rise. Wage growth is also forecast to show a modest increase.

Canada’s GDP and BoC Meeting

A somewhat busy week for Canada comes on the back of the recently concluded federal elections. The final revised GDP estimates for the third quarter come later in the week after the BoC’s meeting.

So far, the economic outlook for Canada remains on a somewhat firm footing comparing to its peers. But still, given the global headwinds, we could expect the Bank of Canada to tread cautiously.

BoC to Keep Interest Rates Steady

No changes are expected from the Bank of Canada as we head into the monetary policy meeting this week. BoC’s overnight rate stands steady at 1.75%. This marks nearly eight months of no change to interest rates.

The Bank of Canada will also be holding a press conference later. Before the meeting, the central bank will be releasing its monetary policy report. This could outline the BoC’s view on the economy and rates.

Q3 GDP to Remain Steady

Statistics Canada will be releasing the quarterly GDP numbers on Thursday. This will be the final GDP estimates for the three months ending September. The year over year change in GDP is 1.2%.

The GDP advanced 0.9% in the second quarter. This was one of the strongest paces of increase in growth. For the third quarter, Canada’s annual GDP is set to advance by 1.8%.

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