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Central bank meetings in spotlight this week

Daily Currency Update

CAD - Canadian Dollar

Currency markets were largely muted on Monday morning as investors waited for Q3 GDP data from the US and central bank meetings in Canada, Japan and the Euro zone, all due this week.

The Canadian dollar softened against its US counterpart even as oil prices continued to climb. USDCAD was up 0.11%, trading around 1.23720.

West Texas Intermediate crude climbed to above $85 USD a barrel for the first time since 2014. The surge in oil prices is part of the broader increase in energy costs that’s adding inflationary pressure to economies as central banks begin to taper stimulus.

Economists polled by Reuters said that they expect The Bank of Canada will raise rates as early as Q3 of next year, earlier than previously expected. The central bank meets this Wednesday.

Key Movers

This week is shaping up to be a key week for the euro as the European Central Bank meets on Thursday. The market is pricing in a 10-basis-point rate hike next year as inflation expectations are finally moving higher. However, the concern for the ECB will be that these inflation expectations are being predominantly driven by the skyrocketing energy prices and are not aligned with the economic growth outlook. This could lead the ECB to disappoint the market by playing down expectations of policy tightening in 2022. This would be a blow for the EUR and could see a decent selloff. EURUSD was down 0.30% at around 1.1612 at the time of writing.

Sterling opened higher this morning, supported by the possibility of a rate hike in November, but gains were capped by concerns about inflation and economic growth. News headlines also suggested plan B could be put into action in the UK in an attempt to tackle ongoing COVID-19 concerns. GBPUSD was up 0.14% trading around 1.3770 at the time of writing.

Wednesday’s Australian CPI data will be closely watched; analysts are expecting an annual pace of 3.8%. The week is set to be rounded out by Australian retail sales on Friday. AUDUSD was up 0.44% trading at 0.74972 at the time of writing.

The US dollar bounced back against a basket of major currencies on Monday morning, trading around 93.80 at the time of writing. The US Dollar Index initially dipped to a one-month low in earlier trading after US Federal Reserve Chair Jerome Powell said on Friday it was not yet time to begin raising interest rates.

Expected Ranges

  • EUR/CAD: 1.434 - 1.4407 ▼
  • GBP/CAD: 1.7 - 1.704 ▲
  • AUD/CAD: 0.9231 - 0.9273 ▲
  • USD/CAD: 1.2341 - 1.2386 ▲