Following the European Central Bank rate decision this earlier period week, which manifest the commencement of a budge back towards ‘normal’ monetary policies, it is apparent with the intention of, agreed President Jean-Claude Trichet’s speechifying, inflation was the driving thing behind the rate hike. Accordingly, with inflation data due made known of Britain and the United States, Bank of England and Federal Reserve inflation hawks will be looking pro additional evidence to support such a aver pro their respective countries. The fee proceedings following British CPI data may possibly be restricted, however, taking into account the Bank of England announced on Thursday with the intention of it would keep tariff on call despite rising inflation, in order to take up again to boost the nation, while a stronger headline map made known the of the United States may possibly flash volatility pro Dollar-based pairs on the foundation with the intention of speculators will budge their rate hike expectations pro the FOMC to a closer appointment.
• U.K. Consumer Price Index (YoY) (MAR): April 12 – 08:30 GMT
The continued cycle of low appeal tariff has deposit noteworthy fee pressure on the British nation, and it appears to be a trend with the intention of won’t be bucked anytime soon. Although producer input prices rose by 14.6 percent on a year-over-year basis in progression, and consumer prices accelerated by 4.4 percent in February, the Bank of England chose to sustain its answer appeal rate by 0.50 percent, and keep up its asset hold curriculum by £200 billion. The map will mark a further data relief in which inflation is higher than the Bank of England’s 2.0 percent threshold pro their standard target, and while speechifying from Bank of England inflation hawks might boost, the markets will likely ignore such commentary. With growth left over muffled, it appears with the intention of the U.K. Nation may possibly be entering a state of stagflation – low growth tariff and rising prices.Join a DailyFX analyst pro live coverage of event!
• Bank of Canada Rate Decision (APR 12): April 12 – 13:00 GMT
Canada has continued to experience moderate growth, with a established labor promote (at a 7.7 percent unemployment rate, down from 7.8 percent in February) and growth in the housing promote of contemporary (housing starts prolonged by 188.8K in progression, up from 183.7K in February). Inside detail, on an annualized basis, Canada’s headline GDP map showed extension of the nation by 3.3 percent in January. Still, inflation has been relatively controlled surrounded by Canada, as evidenced by an inflation rate with the intention of has hovered around 2.0 percent pro the earlier period hardly any months – the CPI map from February showed a 2,2 percent boost in fee pressures on a year-over-year basis. A Bloomberg News survey pegs the rate to wait on call by 100 basis points on Tuesday, even as the disguised futures rate pro June is 1.445 percent. The Credit Suisse Overnight Index Swaps shows a little 4.0 percent of a 25-basis points rate boost by Tuesday’s assembly, though the markets be inflicted with fee 91.0 basis points in ended the then 12-months. Accordingly, commentary following the relief is crucial, as policymakers may possibly commence to employ more hawkish speechifying as a budge back towards plan ‘normalization’ appears to be underway.Join a DailyFX analyst pro live coverage of event!
• U.S. Advance Retail Sales (MAR): April 13 – 12:30 GMT
Equally forecasted continue month, retail sales facts prolonged, continuing a trend of an enhancement of consumption in the American nation pro the eighth consecutive month. Accordingly, agreed the sustained background of improved confidence conditions, our bias remains with the intention of we can expect to think it over additional gains in the headline advance retail sales map. A Bloomberg News survey shows with the intention of retail sales are forecasted to be inflicted with prolonged by 0.5 percent in progression, with growing by 1.0 percent in February. Now with the intention of it is apt evidently apparent with the intention of the Federal Reserve’s hard work to inject liquidity in hub markets might in detail be inflicted with had a clear effect on the American consumer, a further extension in sales facts may possibly provide evidence pro rate hike enthusiasts with the intention of the nation has improved to the top everywhere it is calculate to wind-down the following around of quantitative easing.Join a DailyFX analyst pro live coverage of event!
• U.S. Consumer Price Index (YoY) (MAR): April 15 – 12:30 GMT
Inside could you repeat that? May possibly maybe be the generally valuable data relief ended the way of then week, the consumer fee pointer from the U.S. Will likely be the single event with the intention of sparks the generally fee proceedings across Dollar-based pairs. Debate has heated up amongst Federal Reserve policymakers and FOCM voting members, to such a top with the intention of here is a apparent divide ended could you repeat that? Direction the American nation is tender: The nation has improved, and a run of rate hikes are de rigueur by the aim of the time (Fisher, Kocherlakota); and here is still noteworthy slack in the nation, and here is thumbs down need to wind-down the stimulus preparation previous to its intended finish (Bernanke, Dudley, Lockhart). Nonetheless, the CPI is probable to be inflicted with developed by 2.6 percent in progression, with increasing by 2.1 percent in February, on a year-over-year basis. Hawks are apt increasingly apprehensive with the intention of rising commodity expenditure – COMEX Gold secure an all-time distinguished this week, while COMEX Silver is by a three-decade distinguished - coupled with privileged food prices abroad could be a sign with the intention of a astute boost in fee pressure could be on the verge of hitting the American consumer. Join a DailyFX analyst pro live coverage of event!
• U.S. U. Of Michigan Consumer Confidence (APR P): April 15 – 13:55 GMT
U.S. Consumer confidence is forecasted to increase some time ago more in April’s preliminary conception, with declining in progression. Still, the map is probable to wait not more than 70.0, by a 69.0 consensus, with falling to 67.5 in progression following four consecutive readings higher than 70.0. Equally prominent previous to the continue confidence conception, “[S]hould smear with oil prices wait elevated in this area $100 for every barrel, sentiment may possibly additional fade headed into the summer as chatter prices typically increase all through the midpoint of the time in the United states.” Accordingly, with smear with oil holding higher than $110 for every barrel currently, an erosion in confidence would not be entirely unexpected. Price proceedings pro Dollar-based pairs may possibly be stronger-than-usual taking into account two major U.S. Data releases. Join a DailyFX analyst pro live coverage of event!
Tuesday, April 12, 2011
Trading the Bank of Canada Interest Rate Decision
Trading the News: Bank of Canada Interest Rate Decision
What’s Expected:
Time of release: 04/12/201113:00 GMT, 9:00 EST
Primary Pair Impact: USDCAD
Expected: 1.00%
Previous: 1.00%
DailyFX Forecast: 1.00%
Why Is This Event Important:
A Bloomberg News survey shows all of the 28 economists polled forecast the Bank of Canada to hold the benchmark interest rate at 1.00% in April, but the policy statement accompanying the rate decision is likely to spark increased volatility in the exchange rate as investors expect to see higher borrowing costs over the coming months. According to Credit Suisse overnight index swaps, market participants are pricing the key interest rate to increase by nearly 100bp over the next 12-months, but the central bank may retain its pledge to “carefully consider” future rate hikes given the substantial margin of slack within the real economy. In turn, dovish comments from BoC Governor Mark Carney is likely to spark a bearish reaction in the Canadian dollar, and a reversal in the USD/CAD should push the exchange rate back towards former support around 0.9700 as interest rate expectations falter.
Recent Economic Developments
The Upside
| Release | Expected | Actual |
| Housing Starts (MAR) | 181.0K | 188.8K |
| Ivey Purchasing Manager Index s.a. (MAR) | 62.0 | 73.2 |
| Gross Domestic Product (YoY) (JAN) | 3.1% | 3.3% |
The Downside
| Release | Expected | Actual |
| Net Change in Employment (MAR) | 28.0K | -1.5% |
| Retail Sales (JAN) | 1.0% | -0.3% |
| Consumer Price Index (YoY) (FEB) | 2.3% | 2.2% |
As the economic recovery in Canada gathers pace, with businesses increasing their rate of spending, the ongoing expansion in private sector activity may encourage the central bank to tighten monetary policy further in the first-half of the year as the outlook for growth and inflation improves. However, as households scale back on consumption, with employment contracting for the first time since in six-months, the BoC may retain its wait-and-see approach over the near-term in order to encourage a sustainable recovery. In turn, central bank Governor Carney talk down speculation for higher interest rates, and dovish remarks from the BoC should spark a reversal in the USD/CAD as investors curb speculation for higher borrowing costs.
Potential Price Targets For The Rate Decision
How To Trade This Event Risk
Trading the BoC interest rate decision is certainly not as clear cut as some of our previous trades, but the market reaction to the policy statement could pave the way for a long Canadian dollar trade as the central bank sees the economic recovery proceeding faster than initial expected. Therefore, if Governor Carney holds an improved outlook for the region and sees scope to normalize monetary policy further in the first-half of the year, we will need a red, five-minute candle subsequent to the rate decision in order generate a sell entry on two-lots of USD/CAD. Once these conditions are fulfilled, we will set the initial stop at the nearby swing high or a reasonable distance after taking market volatility into account, and this risk will establish our first target. The second objective will be based on discretion, and we will move the stop on the second lot to breakeven once the first trade reaches its mark in an effort to lock-in our profits.
On the other hand, the BoC may retain a cautious tone for the region given the ongoing slack within the real economy, and the central bank may retain its pledge to carefully consider future rate hikes as the fundamental outlook remains clouded with high uncertainty. As a result, if Governor Carney talks down speculation for higher borrowing costs, we will carry out the same setup for a long dollar-loonie trade as the short position outlined above, just in reverse.
Impact that the Bank of Canada Interest Rate Decision has had on CAD during the last meeting
| Period | Data Released | Estimate | Actual | Pips Change (1 Hour post event ) | Pips Change (End of Day post event) |
| Mar 2011 | 3/01/2011 14:00 GMT | 1.00% | 1.00% | +18 | +27 |
March 2011 Bank of Canada Interest Rate Decision
| The Bank of Canada kept the benchmark interest rate at 1.00% in March given the “considerable slack” within the real economy, and reiterated its pledge to “carefully consider” future rate hikes as the fundamental outlook remains clouded with high uncertainty. The BoC said that the region continues to face “considerable challenges” as the marked appreciation in the local currency dampens the prospects for global trade, and continued to see “poor relative productivity” as private sector demands remain subdued. At the same time, the BoC noted that the recovery is proceeding “slightly faster than expected” as the economic activity in the U.S., Canada’s largest trading partner, gathers pace, and the central bank may retain its wait-and-see approach throughout the first-half of the year in an effort to encourage a sustainable recovery. Indeed, currency traders showed a bearish reaction to the mixed rhetoric from the BoC, with the USD/CAD advancing to a high of 0.9754, but the market reaction tapered off going into the end of the day as the exchange rate closed at 0.9736. |  |
Yen to Extend Gains as Risk Aversion Spills into European Trade
* Japanese Yen Soars, US Dollar and Swiss Franc Follow on Broad-Based Risk Aversion
* Asian Stocks Fall as IMF Cuts US Growth Outlook, Japan Upgrades Nuclear Threat
* UK Retail Sales Drop Most Since 1995, Arguing Against Rate Hikes According to BRC
The Euro and the British Pound declined, down as much as 0.4 percent apiece hostile to the US Dollar as the greenback capitalized on a broad-based move headed for expose aversion across fiscal markets (see below). We be inflicted with identified the outlines of fleeting access setups pro EURUSD and GBPUSD.
The Japanese Yen outperformed in overnight trade, rising as much as 1.6 percent hostile to its major counterparts, as stocks dropped across Asian bourses and spurred broad-based promotion of risky assets counting involve trades funded cheaply in the perennially low-yielding currency. The safety-linked US Dollar and Swiss Franc followed the Japanese element privileged, count as much as 0.2 and 0.7 percent correspondingly hostile to the majors. The Australian Dollar proverb outsized losses, down as much as 1.3 percent on mean.
The MSCI Asia comforting regional target justice pointer fell 1.1 percent – the generally in near a month – with the International Monetary Fund (IMF) graze its fiscal growth outlook pro the US and Japan. The IMF understood US output would add 2.8 percent this time, down from a 2.9 percent boost in 2010. It had previously probable the world’s top consumer promote (and bellwether pro comprehensive recovery) to grow 3 percent in 2011. Sellerswere additional encouraged by news with the intention of Japan's Nuclear and Industrial Safety Agency raised the severity rating of its nuclear predicament to the highest, matching the catastrophe by Chernobyl, as rising radiation levels timely wider evacuations.
On the data front, UK Retail Sales fell 3.5 percent in the time through progression according to the British Retail Consortium, marking the most terrible decline on confirmation since 1995. BRC Director General Stephen Robertson chalked up the upshot to “mounting fuel and helpfulness expenditure, falling household prices, privileged storage bin (a consumption tax) and the possibility of additional [fiscal retrenchment]” as the government facility to reduce the financial statement shortage. Robertson called on the Bank of England to get on to “supporting our weak nation [a priority,]” in conflict hostile to raising appeal tariff.
Stock pointer futures tracking answer European and US exchanges are securely in the red yet to be of the opening bell, hinting the aggressive move headed for expose aversion prominent in overnight trade is fit to involve ended into the following session. On balance, this promises continued gains pro the Japanese Yen, Swiss Franc and US Dollar hostile to their major counterparts, with the particularly risk-sensitive commodity dough bloc facing the generally aggressive promotion pressure.
UK Consumer Price Index facts are fit to trade show the annualized inflation rate held by 4.4 percent in progression, matching a 29-month distinguished recorded in the before month. The conception seems dodgy to yield a strong result from the markets with continue week’s non-event appeal rate decision from the Bank of England. The then answer event pro shaping monetary plan expectations is on tap then week as the central layer releases minutes from its April sit-down, offering insight on the evolution of the hawk/dove balance on the rate-setting MPC.
Germany’s ZEW Survey of investor confidence is probable to trade show sentiment soured in April, marking the following consecutive decline and docile the lowest conception in four months. The gauge unexpectedly declined continue month yet to be of a widely probable appeal rate hike from the European Central Bank amid fears the move was premature as independent expose fears continued to linger. With with the intention of rate boost currently in place, today’s relief will supply as a referendum on the wisdom of the ECB’s events.
* Asian Stocks Fall as IMF Cuts US Growth Outlook, Japan Upgrades Nuclear Threat
* UK Retail Sales Drop Most Since 1995, Arguing Against Rate Hikes According to BRC
Critical Levels
CCY | SUPPORT | RESISTANCE |
EURUSD | 1.4355 | 1.4448 |
GBPUSD | 1.6235 | 1.6383 |
The Euro and the British Pound declined, down as much as 0.4 percent apiece hostile to the US Dollar as the greenback capitalized on a broad-based move headed for expose aversion across fiscal markets (see below). We be inflicted with identified the outlines of fleeting access setups pro EURUSD and GBPUSD.
Asia Session: What Happened
GMT | CCY | EVENT | ACT | EXP | PREV |
23:01 | GBP | BRC Sales Like-For-Like (YoY) (MAR) | -3.5% | - | -0.4% |
23:01 | GBP | RICS House Price Balance (MAR) | -23% | -24% | -26% |
23:50 | JPY | Japan Money Stock M2 + CD (YoY) (MAR) | 2.7% | 2.5% | 2.4% |
23:50 | JPY | Japan Money Stock M3 (YoY) (MAR) | 2.0% | 1.9% | 1.8% |
23:50 | JPY | Bank Lending Banks ex-Trust (MAR) | -1.8% | - | -2.0% |
23:50 | JPY | Bank Lending incl Trusts (YoY) (MAR) | -1.7% | - | -1.9% (R-) |
23:50 | JPY | Bank Lending Banks Adjustments (YoY) (MAR) | -1.7% | - | -1.7% |
0:00 | NZD | QV House Prices (YoY) (MAR) | -2.0% | - | -1.7% |
1:30 | AUD | NAB Business Conditions (MAR) | 9 | - | -2 |
1:30 | AUD | NAB Business Confidence (MAR) | 9 | - | 14 |
The Japanese Yen outperformed in overnight trade, rising as much as 1.6 percent hostile to its major counterparts, as stocks dropped across Asian bourses and spurred broad-based promotion of risky assets counting involve trades funded cheaply in the perennially low-yielding currency. The safety-linked US Dollar and Swiss Franc followed the Japanese element privileged, count as much as 0.2 and 0.7 percent correspondingly hostile to the majors. The Australian Dollar proverb outsized losses, down as much as 1.3 percent on mean.
The MSCI Asia comforting regional target justice pointer fell 1.1 percent – the generally in near a month – with the International Monetary Fund (IMF) graze its fiscal growth outlook pro the US and Japan. The IMF understood US output would add 2.8 percent this time, down from a 2.9 percent boost in 2010. It had previously probable the world’s top consumer promote (and bellwether pro comprehensive recovery) to grow 3 percent in 2011. Sellerswere additional encouraged by news with the intention of Japan's Nuclear and Industrial Safety Agency raised the severity rating of its nuclear predicament to the highest, matching the catastrophe by Chernobyl, as rising radiation levels timely wider evacuations.
On the data front, UK Retail Sales fell 3.5 percent in the time through progression according to the British Retail Consortium, marking the most terrible decline on confirmation since 1995. BRC Director General Stephen Robertson chalked up the upshot to “mounting fuel and helpfulness expenditure, falling household prices, privileged storage bin (a consumption tax) and the possibility of additional [fiscal retrenchment]” as the government facility to reduce the financial statement shortage. Robertson called on the Bank of England to get on to “supporting our weak nation [a priority,]” in conflict hostile to raising appeal tariff.
Euro Session: What to Expect
GMT | CCY | EVENT | EXP | PREV | IMPACT |
6:00 | EUR | German Consumer Price Index (MoM) (MAR F) | 0.5% | 0.5% | Low |
6:00 | EUR | German Consumer Price Index (YoY) (MAR F) | 2.1% | 2.1% | Low |
6:00 | EUR | German CPI - EU Harmonised (MoM) (MAR F) | 0.5% | 0.5% | Low |
6:00 | EUR | German CPI - EU Harmonised (YoY) (MAR F) | 2.2% | 2.2% | Low |
6:45 | EUR | French Current Account (euros) (FEB) | - | -5.1B | Low |
8:30 | GBP | Visible Trade Balance (Pounds) (FEB) | -£8000 | -£7057 | Medium |
8:30 | GBP | Total Trade Balance (Pounds) (FEB) | -£3950 | -£2950 | Low |
8:30 | GBP | Trade Balance Non EU (Pounds) (FEB) | -£4900 | -£4173 | Low |
8:30 | GBP | DCLG UK House Prices (YoY) (FEB) | 0.1% | 0.5% | Low |
8:30 | GBP | Consumer Price Index (MoM) (MAR) | 0.6% | 0.7% | Medium |
8:30 | GBP | Consumer Price Index (YoY) (MAR) | 4.4% | 4.4% | High |
8:30 | GBP | Core Consumer Price Index (YoY) (MAR) | 3.3% | 3.4% | Medium |
8:30 | GBP | Retail Price Index (MAR) | 232.8 | 231.3 | Medium |
8:30 | GBP | Retail Price Index (MoM) (MAR) | 0.6% | 1.0% | Medium |
8:30 | GBP | Retail Price Index (YoY) (MAR) | 5.5% | 5.5% | Medium |
8:30 | GBP | RPI Ex Mort Int Payments (YoY) (MAR) | 5.5% | 5.5% | Low |
9:00 | EUR | German ZEW Survey (Current Situation) (APR) | 85.2 | 85.4 | Medium |
9:00 | EUR | German ZEW Survey (Econ Sentiment) (APR) | 11.3 | 14.1 | High |
9:00 | EUR | Euro-Zone ZEW Survey (Econ Sentiment) (APR) | - | 31 | Medium |
Stock pointer futures tracking answer European and US exchanges are securely in the red yet to be of the opening bell, hinting the aggressive move headed for expose aversion prominent in overnight trade is fit to involve ended into the following session. On balance, this promises continued gains pro the Japanese Yen, Swiss Franc and US Dollar hostile to their major counterparts, with the particularly risk-sensitive commodity dough bloc facing the generally aggressive promotion pressure.
UK Consumer Price Index facts are fit to trade show the annualized inflation rate held by 4.4 percent in progression, matching a 29-month distinguished recorded in the before month. The conception seems dodgy to yield a strong result from the markets with continue week’s non-event appeal rate decision from the Bank of England. The then answer event pro shaping monetary plan expectations is on tap then week as the central layer releases minutes from its April sit-down, offering insight on the evolution of the hawk/dove balance on the rate-setting MPC.
Germany’s ZEW Survey of investor confidence is probable to trade show sentiment soured in April, marking the following consecutive decline and docile the lowest conception in four months. The gauge unexpectedly declined continue month yet to be of a widely probable appeal rate hike from the European Central Bank amid fears the move was premature as independent expose fears continued to linger. With with the intention of rate boost currently in place, today’s relief will supply as a referendum on the wisdom of the ECB’s events.
