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Jan 17 – Top Economic Events – Is The BOC Raising Key Interest Rates Today?

Posted Wednesday, January 17, 2018 by
Arslan Butt • 2 min read

Good morning, fellas. Yesterday, the volatile market gave us some good trade opportunities and team FX Leaders encashed each one successfully. Today is another important day of the week as the Bank of Canada is expected to hike the interest rate by 25 base points. You can capture good trades in both cases if they hike the rate or even if they don’t. Here’s our plan…

Today’s Economic Events

Eurozone – EUR

Final CPI y/y – At 10:00 (GMT), the Eurostat will release European inflation with a forecast of 1.4% vs. 1.5% in the previous month. I’m not expecting much movement on this until we see surprising figures.

Great Britain Pound – GBP

MPC Member Saunders Speaks – Today at 11:45 (GMT), the MPC member Saunders is due to speak at the Financial Intermediary and Broker Association inaugural conference, in London. You need to see if he shares any hawkish remarks to underpin the Sterling.

U.S. Dollar – USD

Capacity Utilization Rate – At 14:15 (GMT), you should see the US capacity utilization rate. It’s a percentage of available resources being utilized by manufacturers, mines, and utilities. Quite logically, the more use of resources signifies more demand for products and ultimate an increasing GDP. Since the figure is expected to be 77.3% vs. 77.1%, the greenback can stay supported. Industrial Production will be monitored at 14:15 (GMT) and it’s also expected to be better than before.

Bank of Canada & Monetary Policy Decision

Here comes the Chief of all economic events. At 14:15 (GMT), the Bank of Canada will be releasing the Overnight Rate along with BOC Rate Statement. It’s widely expected to hike the rate from 1% to 1.25% today.

Did you notice? Every central bank is following the footsteps of the Federal Reserve, the central bank of the United States. Bank of Japan, People Bank of China, European Central Bank, Bank of England and now the Bank of Canada is also shifting its monetary policy from dovish to hawkish.

Will BOC Raise Key Interest Rates Today?

Fellows, as per the recent data on the labor market and retail sales, the Canadian output gap seems to fill rapidly. Which is fuelling the expectations that the Bank of Canada (BOC) could lift rates for a third time today.

Though it’s widely expected to lift the rate by 25 base points but I’m more concerned about the recent developments between the US and Canada. You got me right, I’m referring to the possible termination of NAFTA, which may discourage the BOC from the rates hike this month.

What Happens If BOC Don’t Hike The Rate?

Look at the Canadian dollar’s chart below, do you see the strong bearish candles representing the investors have already “priced in”  most of the rate hike.

USD/CAD - Daily Chart

USD/CAD – Daily Chart

Therefore in case, the Bank of Canada decides to keep the rate on hold at 1%, it would be great opportunity to sell the Loonie. Just keep in mind, the USD/CAD is an indirect currency pair and you need to buy this pair to sell the Canadian dollar. All the best and stay tuned more and more exciting updates.

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