BOC INTEREST RATE STATEMENT LOOMS LARGE
Economic data and monetary policy are in the headlines on Wednesday, with the Bank of Canada (BOC) set to deliver a highly anticipated interest rate decision.
European Central Bank (ECB) governor Peter Praet will kick off the session with prepared remarks at 07:00 GMT. The ECB announced last month it will wind down its record bond-buying program by the end of 2018. Praet’s comments may offer some tidbits about the pace and timing of future policy adjustments.
His colleague Yves Mersch will also deliver a speech at 12:00 GMT.
Shifting gears to economic data, the US Department of Labor will release its June producer price index (PPI) at 12:30 GMT. Factory-gate prices likely rose 0.2% compared with May and 3.2% year-over-year. Excluding the volatile food and energy components, PPI is projected to rise 0.2% month-on-month and 2.6% annually.
The Labor Department will release its highly anticipated consumer price index (CPI) on Thursday.
Commodity traders will be keeping close tabs on weekly crude inventory data courtesy of the US Energy Information Administration (EIA). The EIA is expected to show a drawdown of 4.3 million barrels in the week ended 2 July.
North of the border, the Bank of Canada is expected to raise interest rates on Wednesday in response to a strengthening economy and rising inflation. However, BOC Governor Stephen Poloz will in all likelihood deliver a cautious assessment of the Canadian economy in light of its recent trade tensions with the United States.
Canada’s benchmark interest rate currently sits at 1.25%. A quarter-point hike on Wednesday would mark the fourth upward adjustment in the span of 12 months.
USD/CAD favored the bulls on Tuesday, as prices bounced from a low of 1.3108 to a high of 1.3153. At the time of writing, the pair is trading at 1.3135. Markets are likely to remain steady ahead of the BOC decision.
The Australian dollar declined Wednesday despite a pair of positive economic reports in the form of home loans and consumer confidence. AUD/USD is down 0.2% to 0.7422. The pair fell more than 50 pips on Tuesday as the greenback returned to strength. With the bulls losing momentum, AUD/USD faces immediate support at the 0.7400 level. On the flipside, resistance is likely found at 0.7485.
Europe’s common currency is coming off a volatile session, as the bulls and bears battled for position. EUR/USD fluctuated within a 70-pip range Tuesday, with prices bottoming at 1.1700. The pair would later recover in the mid-1.1700 range. At the time of writing, EUR/USD is valued at 1.1734. Despite the volatile moves, the pair continues to trade within an established range of 1.1500-1.1850.