CPI q/q (***)
On Tuesday, the Australian Bureau of Statistics (ABS) will publish the consumer price index (CPI) for the three months to September. In the second quarter, the index accelerated by 0.8%, and analysts anticipate a similar growth pace for the third quarter as well.
If the inflation figure increases higher than expected, investors will start pricing in a potential rate hike by the Reserve Bank of Australia (RBA) to happen earlier than 2024, as initially planned by the central bank. That will support the Australian dollar versus the USD and other majors.
Trimmed mean CPI q/q (**)
Besides the CPI data, the ABS will also release the so-called trimmed mean CPI for the same period. It doesn’t count the most volatile 30% of items, which reflects the underlying inflation trends. So again, if it comes in higher than the 0.5% expected by economists, the AUD will extend its bullish move.
Monetary Policy Report (***)
On Wednesday, the Bank of Canada’s (BOC) Monetary Policy Report is released only once in a quarter and provides investors with a detailed review of the country’s economic conditions that impacted the decision on the interest rates.
BOC Rate Statement (***)
Later during that day, Canada’s central bank will reveal the updated interest rate decision, which is widely expected to remain at the current record low of 0.25%. BOC, like the rest of the major central banks worldwide, cut the interest rate shortly after the start of the pandemic to support economic growth.
While the central bank will maintain the interest rates unchanged, investors will pay attention to its language to see whether it may consider a rate hike earlier than expected, given the resulting high inflation. We recently mentioned that Canada’s CPI surged last month by 4.4% year-on-year, which is the highest increase since 2003, putting much pressure on the BOC to tighten the monetary policy.
Any hawkish signal from the BOC would support the Canadian dollar, which has already been benefiting from surging oil prices.
BOC Press Conference (***)
One hour after the interest rate decision, the BOC will hold a press conference, discussing the factor that will have affected its interest rate decision, the economic outlook, and inflation, providing investors with relevant insights into future monetary policy decisions. All in all, this will be a volatile day for the pairs involving the Loonie.
BOJ Monetary Policy Statement & Outlook Report (***)
Late on Wednesday, the Bank of Japan (BOJ) will release its Monetary Policy Statement touching upon the outcome of its decision on asset purchases. The statement will contain relevant commentary about the economic conditions that impacted the decision.
The central bank will also present its Outlook Report, which will provide insight into its economic conditions and inflation expectations.
Both events are significant for the Japanese Yen, which will become more volatile against majors like the USD.
Interest Rate Decision and Monetary Policy Statement (***)
On Thursday, the European Central Bank (ECB) will release its interest rate decision, along with the Deposit Facility Rate and the Marginal Lending Facility. The current interest rate is 0% and the ECB is widely expected to keep it unchanged. Again, the main focus will be on the central bank’s language.
Economists expect that the ECB will be the last of the major central banks to start increasing the interest rate, with the ECB planning to do so no earlier than 2024, although there is a possibility of an earlier rate hike due to the inflationary pressure.
Bas van Geffen, senior macro strategist at Rabobank, told Reuters:
“Our baseline forecast is for the ECB to remain on hold through 2024, based on our assessment inflation is indeed transitory, and the expectations the ECB will continue to see it as such. But against the backdrop of higher inflation uncertainty, this does skew risks to an earlier move. That said, we consider current market pricing of a rate hike next year as excessive.”
ECB Press Conference (***)
Later on Thursday, the ECB will hold its monthly press conference, which has two parts, consisting of a prepared statement and then answering to questions from the press. You should pay attention to all the hints at future monetary policy. It will be a big day for the euro pairs, so be ready for higher volatility.
GDP q/q (***)
While the ECB will release its interest rate decision, the US Commerce Department will publish preliminary data on the Gross Domestic Product (GDP) growth for the third quarter, so it will be an important day particularly for the EUR/USD pair. The previous report showed that the US economy had expanded by 6.7% in the second quarter. Now investors anticipate a slowdown, with GDP growth likely to come in at 2.8%. Anything higher than that will support the US dollar.
The US government will also release the weekly jobless claims data, which will also influence the greenback.
German GDP q/q (***)
On Friday, Germany will release its GDP growth preliminary data for the three months to September. Economists expect the indicator to have accelerated by 2.2% following the increase of 1.6% in the second quarter.
Elsewhere, Spain and France will also publish their preliminary GDP data for Q3.
All of these reports will affect the euro, but data coming from Germany is the most relevant.
Strong economic growth in any of these major European economies will support the euro.
The European currency will also be driven by Eurostat’s preliminary inflation data for October (year-on-year), with economists anticipating the CPI to accelerate to 3.7% after September’s 3.4% increase.
Canada GDP m/m
The stream of major fundamentals next week will end with Canada’s GDP report for August. Economists anticipate the indicator to have increased by 0.7% for the month, up from July’s contraction of 0.1%. Upbeat data will be interpreted as bullish for the Canadian dollar.