With little significant data on the docket for the week ahead, most notably market by minutes of the recent meetings from two central banks in on the opposite ends of the spectrum in terms of interest rates and underlying economic conditions, and only one rate decision, longer-term market trends will dictate price action among the major currencies. Having said that, with the Euro-zone and U.S. debt crises reaching critical junctures, any rumors of resolution or worsening of the respective crises will increase volatility across all asset classes.

Bank of Canada Rate Decision (JUL 19): July 1913:00 GMT

The Bank of Canada is widely expected to keep its rates on hold at 1.00 percent at its policy meeting on Tuesday, even as recent underlying economic indicators show that the world’s eleventh largest economy is continuing to strengthen. The Canadian labor market remains particularly resilient, with the unemployment rate holding at 7.4 percent in June, but adding another 28.4K jobs to the economy, well above the 15.0K forecast. The housing market is also improving, with housing starts having jumped by 197,4K in June, up from 194.1K starts in May. Although the overnight index swaps are pricing in just 45.1-basis points over the next 12-months, and there is a miniscule 0.4 percent of a 25.0-basis point rate hike at Tuesday’s meeting, given the recent strengthening of underlying fundamentals, it is likely that Bank of Canada policymakers employ a more hawkish tone at the meeting. Join a DailyFX analyst for live coverage of event!

Bank of England Minutes (JUL): July 20 – 08:30 GMT

The Bank of England kept their rates on hold at their July meeting, as expected, at 0.50 percent on July 7, as price pressures seemingly eased over the past few months, further adding to the Monetary Policy Committee’s disposition that it would need to continue to pump liquidity into the economy despite rising inflationary pressures. The CPI-EU Harmonized grew by 4.5 percent year-over-year in May, the reading ahead of the meeting. Policy makers agreed that the economic outlook has not been stable enough to withstand higher rates. Traditionally, an inflation rate above 4.0 percent would be a signal for the MPC to increase the bank rate but policymakers believe that inflationary pressures “will ease once food and oil prices come down.” As such, a dovish tone is expected in the minutes.Join a DailyFX analyst for live coverage of event!

• Euro-zone Meeting of Finance Ministers: July 21 – 11:00 GMT

In a surprise event, the head of the European Union, Herman van Rompuy, noted this today: “I have decided to convene a meeting of the Euro area Heads of State or Government on Thursday, 21 July, at 12.00 in Brussels. Our agenda will be the financial stability of the Euro area as a whole and the future financing of the Greek programme. I have asked the preparatory work to be brought forward inter alia by the Finance Ministries.” It’s clear that the Euro-zone sovereign debt crisis is worsening at a pace faster-than-expected, so an emergency meeting is certainly not a strong sign for the currency bloc’s health. After multiple downgrades over the past few weeks from the major rating agencies, European bonds’ yields have soared, drawing speculation that the Euro-zone is on the verge of breaking up.

United States Debt-Deal Deadline: July 22 – --:-- GMT

While the official deadline for the U.S. to run out of money to be able to pay back its debt obligations is August 2, President Obama has recently noted that the ‘actual’ deadline for a debt deal is July 22, as it would take approximately the remainder of the time until the debt obligation deadline for the proper legislation to make its way through the House of Representatives and the Senate. The stakes on both sides are enormous: it would plunge the U.S. economy in a recession almost immediately, with Treasuries’ yields soaring, and gross domestic product falling by approximately 10 percent in the first few weeks alone – Senator Harry Reid noted this, saying “If we didn’t pay our bills, it would plunge the United States not into a recession, not into the so-called double-dip recession, but into a full-blown depression.” This is the most important event of the week, as markets will become exceptionally jittery ahead of the deadline.

Canadian Consumer Price Index (YoY) (JUN): July 22 – 11:00 GMT

Canadian consumer prices are expected to fall slightly to 3.6 percent, after hitting a multi-year high at 3.7 percent in May. Still, despite the brief reprieve in inflationary pressures, the consumer price index has gained nearly every month since October 2010, on a steady trend upward.Talk of a rate hike has been minimal by Bank of Canada officials, considering a stronger Loonie over the past few months against a basket of currencies has insulated the economy from accelerating prices like elsewhere across the G-7 economies. Nonetheless, short-term volatility would be stoked if the reading is not in line or within 10-bps of analysts’ expectations. 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.

Written by Christopher Vecchio, Currency Analyst

To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com

Follow Christopher Vecchio on Twitter: @CVecchioFX