Summary:

• Bank of Canada is expected to hike rates today as it continues its monetary tightening
• US data might provide fuel for the greenback to keep on rising
• Australian jobs report the most crucial event for the AUD this week

Wednesday is going to be dominated be the Bank of Canada decision which is expected to lift rates for the third time over the course of the last months. Nevertheless we are quite far away from a done deal scenario, thus the Canadian dollar could see heightened volatility. On top of that industrial output from the US will be revealed as well which might help the beleaguered US dollar. Finally, Aussie traders await the jobs report which is by far the most important figure to watch for this week.

2:15 pm BST – US industrial production: The US dollar has had a bad start to the new year as the euro has surged notably capping any gains on the buck. However, in early Wednesday’s trading the greenback appears to be regaining its momentum as the Bloomberg USD index is up almost 0.4%. Even as we are still above a key short term support on the EURUSD (1.22) today’s better than expected industrial output reading from the US might resurrect the domestic currency at least in the short term. The consensus points to a 0.5% mom increase against the prior print at 0.2% mom. Moreover, capacity utilization is anticipated to show 77.4% compared to 77.1% seen in November 2017.

3:00 pm BST – BoC’s rate decision: The Canadian dollar has outperformed its counterpart from the US recently which however has stemmed mainly from weakness in the latter. Notice that both central banks have already hiked rates a few times but from the historical point of view the Canadian dollar seems to be better backdrop ahead. Thus, once the BoC chooses to lift rates today it could be another turning point for the CAD pushing the USDCAD below a pivotal support at a 1.24 handle. Albeit interest rate traders are not so sure the bank will hike today, odds have increased of late though. At the time of writing the OIS-implied likelihood indicates nearly 90% for a rise in rates today but it was roughly 70% just a week ago. One may conclude that a hike has yet to fully priced in and therefore it could provide the upside for the CAD.

2:30 am BST (18th) – Australian employment report: Aussie traders could have been happy of late as the AUD has made incredible gains against the greenback and elsewhere as well. However, the AUD is going to witness lofty volatility as both the domestic jobs report and a package of data from China (including GDP) are scheduled to be published overnight. When it comes to the Australian reading the street’s call points to a change in employment by 15.2k while the jobless rate is forecast to stay at 5.4%.

Central bank speakers scheduled for today:

• 8:30 am BST – ECB’s Villeroy
• 8:55 am BST – ECB’s Nowotny
• 11:45 am BST – BoE’s Saunders
• 1:50 pm BST – Riksbank’s Ohlsson
• 8:00 pm BST – FED’s Evans and Kaplan
• 9:30 pm BST – FED’s Mester

Any upside on the USDCAD could be capped once the Bank of Canada hikes rates later today. Source: xStation5