Summary:

  • ECB meeting is the most crucial event scheduled for this week
  • Will BoC decide to hike rates for the third time this year?
  • Initial GDP reading from the UK could shake the pound once again, a release from the US will take place as well

The beginning of the week is relatively quiet as it usually tends to be however there will be big events going forward with the ECB decision being the most important one to watch. On top of this, the BoC will make a decision on rates as well and even as the probability of an increase is low, bear in mind that the Canadian central bank hiked rates twice in the third quarter despite equivocal expectations. At first let’s have a look at Monday:

  • 8:00 am BST – ECB’s Praet speaks in Frankfurt
  • 1:30 pm BST – Chicago FED national activity index
  • 6:30 pm BST – ECB’s Nowotny speaks in London

What to watch this week beyond Monday?

Investors were not intimidated by the 30th anniversary of the Black Monday in the US and equity markets stormed to new all time highs in both US and Germany, lifted partly by hopes for tax cuts in the United States. A successful vote for for the budget in the Senate lifted the greenback as well, and the euro remained firm ahead of the ECB meeting while NZD crushed on unwanted populist coalition. The incoming week is full of major important reports and events with the ECB being on top.

ECB decision (Thursday, 12:45pm BST), Mario Draghi press conference (Thursday, 1:30pm BST): The ECB meeting is the most anticipated market event this month. As the economic conditions in the euro zone improved, traders have been bracing for the policy change in Europe but have received few details thus far. It seems like the Bank needs to deliver now, the December meeting is relatively late to announce changes about to be introduced from January and traders will be awaiting details. The market consensus is for the Bank to keep buying bonds for another 9 months in 2018 but at increasingly slower pace. You can see that the euro has been resilient amid recent USD strength so any disappointment from Mario Draghi could have far reaching consequences. Affected markets: EURUSD, DE30.

GDP report in UK (Wednesday, 9:30am BST) and US (Friday, 1:30pm BST): Quarterly GDP reports are always relevant for respective currencies and it might not be more true for the pound as traders ponder if the BoE has what it takes to increase interest rates at the upcoming meeting. Let us recall that GDP growth disappointed in the second quarter and weak retail sales data for September suggests that the UK economy might not be ready for tighter policy. In the US the GDP growth is expected to have been affected by hurricanes but a solid 2.5% is expected nevertheless. Affected markets: GBPUSD, Gold.

Bank of Canada decision (Wednesday, 3pm BST): Ignore the impact of the Bank of Canada at your own risk! The BoC increased interest rates twice in the third quarter despite many disbelievers, especially in September, and the CAD was the strongest G10 currency in the July – September period. The data flow from the Canadian economy has been very solid and oil prices remain at elevated levels which should keep the BoC on the tightening track. Even if we see no hike this time around (odds are at just 21%), communication could stress more increases in following months. Affected markets: USDCAD

link do file download linkThe USDCAD jumped on Friday due to disappointing numbers on retail sales and on a miss seen in inflation. The pair managed to break through 1.26 which could constitute a support for buyers and a potential interesting buying opportunity. Source: xStation5