RBA, BoE and BoC Rate Decisions May Set Course for Medium Term Direction

• RBA Interest Rate Decision – Sep 07– 04:30 GMT

The RBA was widely expected to remain on hold before last week’s second quarter GDP report printed at 1.2%, exceeding expectations of 0.9%. July retail sales growing at 0.7% was also an upside surprise, confirming that domestic growth continues to accelerate despite the aggressive tightening of policy makers. Despite the robust fundamental data markets are still pricing in a zero percent chance of a change in policy, with overnight index swaps looking for 12 bps in hikes over the next year. Nevertheless, we could see some expectations of a rate hike start to get priced in a head of the release as they jumped from -20 on the growth data. Therefore, the potential for a negative response exists if policy makers stand pat, and take a dovish stance. Join a DailyFX analyst for live coverage of event.

• U.K. Industrial Production (JUL) – Sep 8 – 08:00 GMT

U.K. industrial production is expected to have grown by 0.4% in July adding to the case that the recovery is sustaining. A slowing global economy and domestic fiscal belt tightening are looming hurdles which has policy makers reluctant to alter current policy. However, evidence that growth is remaining firm should raise the outlook for U.K. interest rates as policy makers have shown concern over inflation above their 3.0% threshold. Therefore, a surge in activity could spark brief sterling support ahead of the looming BoE rate decision. Conversely, an unexpected slowdown in output could raise the outlook for additional QE, potentially sinking the Pound.

• Bank of Canada Rate Decision – Sep 8 – 13:00 GMT

Despite a run of disappointing fundamental data markets are still pricing in a 56% chance of a rate hike by the BoC at their upcoming policy meeting. The labor market in July gave back jobs for the first time in seven months, but August forecasts are looking for a rebound in hiring. Yet, an unexpected deceleration in core inflation to 1.6% from 1.7% will provide policy makers the luxury of remaining on hold as they better assess the prospects of the global economy. The U.S. labor report showing sustained private job growth could be enough to inspire policy makers to raise rates by 25 bps for a third time to 1.00%, adding to prevailing “loonie” support. Join a DailyFX analyst for live coverage of event.

• BoE Rate Decision – Sep 9 --11:45 GMT

The Bank of England finds itself in the unenviable position of trying to promote growth while inflation remains above their 3.0% threshold. Their case for not raising rates is that there is sufficient slack in the economy which ultimately put downward pressure on prices. However, U.K. fundamentals have proven to this point that growth remains as sticky as prices which could force the MPC to begin tightening sooner than expected. Market participants are giving a 4% chance of a rate hike at Thursday policy meeting, despite expectations for only 15 bps in rate hikes over the next twelve months. The most likely scenario is the central bank remains on hold, which makes it a non-event. However, if they did raise rates or add to their asset purchase program it could spark extreme volatility and set the course for medium term direction. Join a DailyFX analyst for live coverage of event.

• Canadian Net Change in Employment (AUG) – Sep 10 – 11:00 GMT

Following a BoC rate decision the labor report may lose some of its steam but with expectations for a rebound in job growth from July’s unexpected decline could generate bullish “loonie” sentiment. Forecasts are for a job increase of 30,000 in August which would calm fears that the economy is slowing and could raise expectations for a future rate hike regardless, of what the BoC does at their policy meeting. Join a DailyFX analyst for live coverage of event.

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

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