Canadian Dollar, NZ Dollar, Swiss Franc, and British Pound All Face Rate Decisions

•    Bank of Canada Rate Decision – December 8, 9:00 ET
The Canadian dollar could see a pickup in volatility on Tuesday at 9:00 ET as the Bank of Canada is expected to leave rates unchanged at 0.25 percent once again. After the Bank left rates unchanged on October 20, they repeated that they would maintain a neutral stance through June 2010 and maintain their liquidity program through January 2010. This is likely to remain the case once again, and unless the central bank signals some sharp revisions higher for GDP or CPI, the Canadian dollar could fall upon the release of the policy statement.

•    Reserve Bank of New Zealand Rate Decision – December 9, 15:00 ET
The Reserve Bank of New Zealand (RBNZ) is still anticipated to leave the Official Cash Rate target unchanged for the fifth straight meeting at 2.50 percent. In RBNZ Governor Alan Bollard's last policy statement on October 29, he sounded cautious on the outlook for the economy, especially because the strength of the New Zealand dollar had created additional risks. Where the New Zealand dollar ends the trading day will likely have to do with the status of one statement though: the final portion. The last policy statement showed that the RBNZ would “expect to keep the OCR at the current level until the second half of 2010.” This was a change from the previous month when the central bank had left the door open to further rate cuts, which explains why the New Zealand dollar initially rallied. Nevertheless, Credit Suisse OIS rates have gradually fallen to reflect expectations for 163 basis points worth of rate hikes over the next 12 months, compared to 232 basis points on October 28. Overall, if the RBNZ’s statement is more bullish on the economic outlook, the New Zealand dollar could rally. However, if the central bank puts a focus on the risks stemming from the currency’s appreciation, the New Zealand dollar could fall on intervention concerns.

•    Swiss National Bank Rate Decision – December 10, 3:30 ET
The Swiss National Bank is likely to leave their 3-month LIBOR target range unchanged at 0.0 percent - 0.75 percent, but the thing to watch for in the SNB’s subsequent policy statement is revisions to their economic outlook and talk of FX intervention. The SNB said in September that it expects real GDP to fall by between 1.5 percent and 2 percent this year, compared to previous forecasts for declines of 2.5 percent to 3.0 percent, and as evidenced by the Swiss franc’s subsequent gains, this positive news overrode their statements that they would “continue to act decisively to prevent any appreciation of the Swiss franc against the euro.” We know that 1.5000/10 is the line in the sand for the SNB when it comes to EURCHF, since previous drops to that level have been followed by sharp reversals, signaling intervention attempts. If the SNB’s focus is on the currency’s appreciation, rather than fundamental outlooks, EURCHF could rally.

•    Bank of England Rate Decision – December 10, 7:00 ET
The Bank of England (BOE) is anticipated to leave rates unchanged at 0.50 percent on Thursday at 7:00 ET, but this won’t even be the market-moving part of the announcement. Instead, traders will be looking toward the BOE’s policy statement. This has consistently been the prime “news event” of recent rate decisions. Last month, the BOE indicated that they would be expanding their quantitative easing program by £25 billion to £200 billion, but since this was smaller than anticipated, the British pound rallied. This time around, no program changes are expected, and as a result, the currency could gain on the news as traders would price in an end to the BOE’s quantitative easing program.

•    US Advance Retail Sales (NOV) – December 11, 8:30 ET
The Commerce Department is forecasted to report that US retail sales rose 0.6 percent in November, after rising 1.4 percent in October on the back of auto sales. Likewise, the retail sales index excluding autos is projected to increase by 0.5 percent, but looking at the International Council of Shopping Centers report, the results could be disappointing. The index showed that same store sales fell 0.3 percent in November from a year earlier, led by apparel and department store sales. However, with sales of jewelry and electronics reportedly up sharply to mark the start of the holiday shopping season on Black Friday, the upcoming advance retail sales report could reflect rising consumption trends through the end of the year. The US dollar’s response to the data may have more to do with Treasury moves than anything else, as news that stokes higher yields will also ignite gains in the greenback.

See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.

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