We’ve got three central bank decisions scheduled this week, with two widely expected to announce rate hikes.
What else should you look out for?
ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!
Which calendar events will be under the spotlight and what are markets expecting? Here’s a list:
Major Economic Events:
U.S. CPI (Apr. 12, 12:30 pm GMT) – Before the central banks get the ball rolling this week, Uncle Sam will be printing its CPI figures for March. Will we see another pickup in price pressures?
Analysts expect the headline reading to advance from 0.8% to 1.2% and the core figure to post another 0.5% increase for the month. Stronger than expected results might stoke Fed tightening expectations, leading hardcore dollar bulls to price in a 0.50% hike soon.
RBNZ monetary policy statement (Apr. 13, 2:00 am GMT) – New Zealand’s central bank is expected to carry on with its tightening moves, likely hiking interest rates from 1.00% to 1.25% this week.
Some even expect the RBNZ to announce a 0.50% increase in borrowing costs since inflation has been running high and the economy has been doing pretty well.
U.K. CPI (Apr. 13, 6:00 am GMT) – The U.K. will also be printing its inflation figures for March this week, and many are betting on yet another surge in price levels.
The headline reading is slated to climb from 6.2% to 6.7% while the core figure probably ticked higher from 5.2% to 5.3%. This should keep the pressure on for the BOE to tighten monetary policy, especially if the actual figures beat estimates.
BOC monetary policy statement (Apr. 13, 2:00 pm GMT) – Canada’s central bank will be announcing its policy decision mid-week and might even increase rates by 0.50% to 1.00%.
The country’s six major financial institutions are unanimously predicting a sharp increase in borrowing costs since firms are already hitting capacity constraints while inflation and unemployment are hitting record levels.
In addition, the BOC is expected to announce balance sheet tightening by putting an end to the reinvestments of maturing assets.
Australian employment report (Apr. 14, 1:30 am GMT) – The Land Down Under is expected to show a slower pace of hiring for March, as analysts predict a 30K increase versus the earlier 77.4K gain.
This might still be enough to bring the jobless rate down from 4.0% to 3.9% for the month, which might keep Aussie bulls hopeful for an RBA hike sometime in the middle of this year. Weaker than expected results, however, could put the Australian central bank behind the pack when it comes to tightening policy.
ECB monetary policy decision (Apr. 14, 11:45 pm GMT) – No actual changes are expected from the ECB when it comes to interest rates or bond purchases, but don’t dismiss this as a non-event just yet!
Recall that their earlier statement turned out less dovish than usual, as ECB head Lagarde signaled that they might be ready to withdraw stimulus pretty soon.
However, geopolitical risks coming from the war in Ukraine and the freshly-concluded French elections might be enough reason for policymakers to hold their horses. Better watch out for euro volatility during the press conference, too!
U.S. retail sales (Apr. 14, 12:30 pm GMT) – A pickup in consumer spending is eyed for March, as the headline retail sales reading probably climbed by 0.6% while the core figure might be up by 1.0%. This would be more than double the previous 0.3% increase and the 0.2% gain respectively.
Forex Setup of the Week: EUR/AUD
EUR/AUD 4-hour Forex Chart
Euro traders might be in for more volatility this week, as the ECB gears up to make its monetary policy decision.
Many were surprised to see some policymakers turn more hawkish during the previous statement, but the situation has changed significantly in the past month.
For one, Russia’s attack on Ukraine had wider-reaching repercussions to the region, possibly prompting ECB officials to rethink any tightening plans.
To top it off, France is just about to conclude its Presidential elections, so any big shift in leadership might bring additional uncertainty.
With that, EUR/AUD could carry on with its slide after breaking below its descending triangle support earlier on. The pair has since pulled up for a retest, and the Fib levels line up with several potential resistance zones.
In particular, the 61.8% retracement level coincides with the triangle top and 100 SMA dynamic resistance at 1.4725. If any of the Fibs are able to keep gains in check, the pair could slide back down to the swing low or lower!
Technical indicators are pointing to more losses, as the 100 SMA is below the 200 SMA while Stochastic seems to be on its way south.
