Fed Special Meeting Adds To Week of Rate Decisions and Labor Data
A surprise Fed meeting to discuss the discount rate added to a week full of major event risk with the RBA, BoJ, BoE and ECB rate decisions already scheduled. The Australian central bank is the only expected to make a change in monetary policy but the potential for the MPC to alter their asset purchase program will put the Pound at risk. Beyond the policy meetings there is plenty of significant fundamental release that will offer potential volatility including employment reports from Australia and Canada along with U.S. and U.K. service sector readings.
• Fed Discount Rate Meeting – April 5 - 15:30 GMT
A special meeting from the Fed to discuss the discount rate which currently stands at 0.75% following a surprise rise in February. Another increase to the rate that the central bank charges depositary institutions will raise expectations for a similar move to the Fed funds rate. Although policy makers continue to stick to their rhetoric that “rates will remain low for an extended period”, the words will hold less weight following a consecutive rise to the discount rate. The dollar could see support on the back of the higher yield expectations as many of its counterparts appear from tightening.
• RBA Rate Decision – April 6 - 04:30 GMT
The RBA is expected to raise rates for the fourth time in the last five rate decisions, bring the target rate to 4.00% from 3.75%. The benchmark rate was at 3.00% at the beginning of the tightening cycle and another rate hike would make it the undisputable high yielder. Policy makers in the antipode nation have been the most aggressive as several of its counterparts are still months from considering a change in policy. Early expectations were that they would pause for a second month as they assess the impact of the prior rate hikes and the potential impact from China’s efforts to curb their domestic growth. Another hold from the central bank could sink the Aussie with further tightening adding support.
• BoE Rate Decision – April 8–11:00 GMT
The Bank of England continues to fund itself in a difficult position as they try and balance inflation at their threshold of 3.0% and existing downside risks in the economy. The MPC is expected to keep rates unchanged and pause their asset purchase program for another month. The manufacturing sector expanding to its highest level in 15 years could be enough to lead policy makers to bring an official end to their liquidity providing efforts. However, a nine month low in mortgage approvals is a clear sign that credit conditions remain tight which is a serious threat to the recovery. Additional QE could sink the pound with another pause leaving it range bound against the dollar.
• ECB Rate Decision – April 8- 11:45 GMT
Deficit issues in Greece continue to cast a cloud on the region as the troubled nation continues to have trouble financing its debt. An agreement from European leaders to be a lender of last resort following aide from the IMF has restored some confidence in the region but a downgrade of Portugal’s credit rating by Fitch is a sign that the problem isn’t exclusive to Greece. Therefore, the ECB may be hard pressed to consider raising rates with so many of its member nations struggling. Inflation at 0.9% and well below the central bank’s 2.0% target eliminates any urgency on policy markers part to begin tightening. However, an improving German labor market and the latest CPI-estimate of 1.5% are warnings signs and could lead to a change in rhetoric from President Trichet who has maintained that risks between inflation and growth remain balanced. If this is the case we could see Euro support as the central bank leader will often telegraph future changes in policy by using subtle changes in language. Another bout of expected language will firm expectations that the region will soon become the laggard in the move to tightening which may put added pressure on the single currency.
• Canadian Employment Change (MAR) April 9 - 11:00 GMT
The Canadian economy is expected to have added jobs for a third consecutive month in March as it continues to benefit from demand for raw materials. Emerging markets have continued their appetite for Canadian exports which has offset weakness form the U.S. and fueled hiring. As more Canadians find work the outlook for domestic growth continues to brighten, especially with signs that the U.S. is turning the corner. The BoC may be forced to raise rates soon as strong consumer spending could follow putting upward pressure on prices. Rising interest rate expectations will add support the already strong “loonie” which could see it look to test parity against the dollar.
See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.
Send questions or comments to jrivera@dailyfx.com
• Fed Discount Rate Meeting – April 5 - 15:30 GMT
A special meeting from the Fed to discuss the discount rate which currently stands at 0.75% following a surprise rise in February. Another increase to the rate that the central bank charges depositary institutions will raise expectations for a similar move to the Fed funds rate. Although policy makers continue to stick to their rhetoric that “rates will remain low for an extended period”, the words will hold less weight following a consecutive rise to the discount rate. The dollar could see support on the back of the higher yield expectations as many of its counterparts appear from tightening.
• RBA Rate Decision – April 6 - 04:30 GMT
The RBA is expected to raise rates for the fourth time in the last five rate decisions, bring the target rate to 4.00% from 3.75%. The benchmark rate was at 3.00% at the beginning of the tightening cycle and another rate hike would make it the undisputable high yielder. Policy makers in the antipode nation have been the most aggressive as several of its counterparts are still months from considering a change in policy. Early expectations were that they would pause for a second month as they assess the impact of the prior rate hikes and the potential impact from China’s efforts to curb their domestic growth. Another hold from the central bank could sink the Aussie with further tightening adding support.
• BoE Rate Decision – April 8–11:00 GMT
The Bank of England continues to fund itself in a difficult position as they try and balance inflation at their threshold of 3.0% and existing downside risks in the economy. The MPC is expected to keep rates unchanged and pause their asset purchase program for another month. The manufacturing sector expanding to its highest level in 15 years could be enough to lead policy makers to bring an official end to their liquidity providing efforts. However, a nine month low in mortgage approvals is a clear sign that credit conditions remain tight which is a serious threat to the recovery. Additional QE could sink the pound with another pause leaving it range bound against the dollar.
• ECB Rate Decision – April 8- 11:45 GMT
Deficit issues in Greece continue to cast a cloud on the region as the troubled nation continues to have trouble financing its debt. An agreement from European leaders to be a lender of last resort following aide from the IMF has restored some confidence in the region but a downgrade of Portugal’s credit rating by Fitch is a sign that the problem isn’t exclusive to Greece. Therefore, the ECB may be hard pressed to consider raising rates with so many of its member nations struggling. Inflation at 0.9% and well below the central bank’s 2.0% target eliminates any urgency on policy markers part to begin tightening. However, an improving German labor market and the latest CPI-estimate of 1.5% are warnings signs and could lead to a change in rhetoric from President Trichet who has maintained that risks between inflation and growth remain balanced. If this is the case we could see Euro support as the central bank leader will often telegraph future changes in policy by using subtle changes in language. Another bout of expected language will firm expectations that the region will soon become the laggard in the move to tightening which may put added pressure on the single currency.
• Canadian Employment Change (MAR) April 9 - 11:00 GMT
The Canadian economy is expected to have added jobs for a third consecutive month in March as it continues to benefit from demand for raw materials. Emerging markets have continued their appetite for Canadian exports which has offset weakness form the U.S. and fueled hiring. As more Canadians find work the outlook for domestic growth continues to brighten, especially with signs that the U.S. is turning the corner. The BoC may be forced to raise rates soon as strong consumer spending could follow putting upward pressure on prices. Rising interest rate expectations will add support the already strong “loonie” which could see it look to test parity against the dollar.
See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.
Send questions or comments to jrivera@dailyfx.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.
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