Canada interest rate decision takes center stage

20 January,, Lagos – The sterling took center stage yesterday following inflation data from the UK as well as Bank of England Governor Carney’s speech. Today, we have the average earnings index and claimant count change lined up for release. The sterling broke a seven year low against the US dollar yesterday and looks set to extend the losses.

From other regions, we have the Canada interest rate decision, which is likely to result in a rate cut. Key data from the US is also due.

UK Claimant Count Change (10:30 A.M GMT)

The sterling dipped across board yesterday, after Gov. Carney killed hopes of a soon to come rate hike. Apparently, the current growth rate is not convincing enough as the BoE governor clearly stated that the economy remains too weak for him to contemplate rate hikes. This is a reminder of the distance that needs to be covered before the economy is fully restored to normality, seven years on from the global financial crisis. The CPI report showed a rebound of inflation, with the latest Consumer Price Index (CPI) reading showing a 0.2% change in the price of goods and services purchased by consumers. It finally rose above the 0.1% mark for the first time in 11 months, propelled by the increase in air fares, which rose at the highest pace in 13 years between November to December.

The claimant count change and average earnings report today would now be the focus as the sterling remains weak.

Canada interest rate decision (3:00 P.M GMT)

We share Barclay bank’s view that as of now, the market is pricing 20bp out of a 25bp cut for and a cumulative 40bp for all of 2016. Given the current market pricing and with no end in sight for oil devaluation, we expect the BoC to cut its rate by 25bp and the CAD to weaken, consequently. Other news from Canada due today are Manufacturing Sales m/m and Wholesale Sales m/m at 1:30 P.M GMT.

US CPI (1:30 P.M GMT)

Today, we expect the US inflation data forecast to remain flat at 0.0% and the core CPI also remain at 0.2%. We also have the Building Permits and Crude Oil Inventories. The dollar has been mixed in recent times, however, we expect emerging data to drive the trend of the greenback.

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