11 April, AtoZForex, Lagos – Last week, the Australian dollar fell off nine month highs, after the Reserve Bank of Australia (RBA) opted to leave the rates at 2.00%. Governor Glenn Stevens pointed out that the available information suggests that the economy is continuing to rebalance following the mining investment boom. Consistent with developments in the labour market, overall GDP growth picked up over 2015, despite the contraction in mining investment. The pace of lending to businesses has also picked up. Inflation is quite low. Recent information has confirmed that growth in labour costs remains quite subdued.
Following the dovish FOMC minutes released last week, it has become increasingly unlikely that the Fed will raise rates anytime before June. This is due to concerns over the U.S. central bank’s limited ability to counter the blow of a global economic slowdown. The timing remains uncertain even though policy makers signaled in their March meeting that rates are likely to be hiked twice this year.
The Canadian dollar ended the week strong against the greenback, following an impressive data release, which showed the country added far more jobs than expected last month, thanks to accelerated hiring in the service sector and bringing the unemployment rate down from a three-year high. Employment change was 40.6k, beating forecast for a 10.3k increase, while unemployment rate fell to 7.1%. The Canadian dollar is expected to continue strengthening against the USD into the new week.
It is a big week ahead, as we have key data releases like US retail sales, UK Official Bank Rate, Australia employment data and more.
US retail sales and consumer price index (CPI)
It is quite a big data week for the USD. On Monday, we have a Federal Reserve announcement, where the Fed is due to discuss the discount rates to be charged by the Federal Reserve Banks. This is an unexpected meeting, therefore prompting major attention from traders, considering that the last time the Fed held such a meeting was on November 21, after which rate hikes were launched in December. Major focus will also be on the retail sales data due on Wednesday. Considering the Fed’s latest series of dovish comments, and relative downbeat outlook on the economy, data like the US retail sales will be closely watched, to access the level on consumer spending. Along with the Consumer price index due on Thursday, which will give a picture on the inflation situation. On Friday, we also have the Prelim UoM Consumer Sentiment. The dollar is presently mixed against its major counterparts, but will likely take shape upon the release of these data reports.
UK Official Bank Rate
UK policy makers are likely to unanimously vote to maintain Official Bank Rate at 0.5%, while also maintaining the stock of purchased assets financed by the issuance of central bank reserves at £375 billion. As the bank has in recent time shown that this is the best policy stance to meet the 2% inflation target and in a way that helps to sustain growth and employment. On Tuesday, we also have the consumer price index, forecast to show a 0.3% change in the price of goods and services purchased by consumers. The pound is in a downward trend against the USD and looks set to remain so.
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Bank of Canada rate decision
Having held rates at 0.5% since July, 2015, after cutting rate twice last year to stimulate growth, the BOC is likely to maintain rates at current levels. In January, the Canadian central bank lowered its economic growth projection for this year to 1.4% in January. The BOC will most likely now wait for the federal budget’s fiscal measures this month, before determining its next course of action. On Friday, we also have the Manufacturing Sales m/m data due for release. The Canadian dollar is expected to remain strong, with the USDCAD edging further down after the CAD found renewed strength on Friday following the impressing employment report.
Other key news for the week includes Australia’s employment data. The USD and pound will remain the focus currencies for the week, considering the importance of the upcoming data.
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