Bank of Canada Rate Hike Expected Today

The BOC is expected to deliver an Interest rate hike of 25bps today as it seeks to catch up with an economy that is flying high. BOC’s Governor Poloz will deliver his decision and Press Conference, where he will outline the factors involved in making the decision. Chief among them will be the broad underlying wage growth and strong price dynamics of the economy, coupled with excesses in the financial system. The Governor down-played NAFTA concerns in his December speech but as the Trade negotiations are on-going this week, they will remain a concern for the economy unless a positive resolution can be found. With this in mind, a somewhat dovish speech is expected today to balance strong economic performance with ongoing uncertainties, maintaining flexibility for future policy decisions. We await the BOC decision at 15:00 GMT.

German Harmonised Index of Consumer Prices (YoY) (Dec) was released unchanged at 1.6%, as expected. Wholesale Price Index (MoM) (Dec) was -0.3% v an expected 0.3%, from 0.5% previously. Wholesale Price Index (YoY) (Dec) was 1.8% v 3.3% previously. EURUSD sold off from 1.22676 to 1.22157.

UK Consumer Price Index (YoY) (Dec) was 3.0%, as expected, from 3.1% previously. Core Consumer Price Index (YoY) (Dec) was 2.5% v an expected 2.6%, from 2.7% prior. Consumer Price Index (MoM) (Dec) came in as expected at 0.4%, from 0.3% prior. Producer Price Index – Output (MoM) n.s.a. (Dec) was 0.4% v an expected 0.3%, from 0.3% previously, which was revised up to 0.4%. Producer Price Index – Output (YoY) n.s.a. (Dec) was 3.3% v an expected 2.9%, from 3.0% previously, which was revised up to 3.1%. Producer Price Index – Input (MoM) n.s.a. (Dec) was 0.1% v an expected 0.4%, from 1.8% previously, which was revised down to 1.6%. Producer Price Index – Input (YoY) n.s.a. (Dec) was 4.9% v an expected 5.4%, from 7.3% previously. PPI Core Output (MoM) n.s.a. (Dec) was 0.3% v an expected 0.2%, from 0.2% previously. PPI Core Output (YoY) n.s.a. (Dec) was 2.5% v an expected 2.3%, from 2.2% previously. GBPUSD sold off from 1.37826 to 1.37416 after the data release.

Australian Westpac Consumer Confidence (Jan) was released, coming in at 1.8%. The previous reading was 3.6%. This release sent the AUDUSD pair higher from 0.79636 to 0.79737.

Japanese Machinery Orders (YoY) (Nov) was released at 4.1% with a consensus of -0.7% expected, from 2.3% prior. Machinery Orders (MoM) (Nov) was released at 5.7% with a consensus of -1.4% expected, from 5.0% previously. USDJPY moved higher from 110.288 to test 110.427 after this data release.

Australian Home Loans was released at 2.1% v a consensus of -0.2%, from -0.6% previously. Investment Lending for Homes (Nov) was 1.5% from 1.6% prior. AUDUSD stepped higher to test 0.79990.

Chinese FDI – Foreign Direct Investment (YTD) (YoY) (Dec) was 7.9% from 9.8% previously.

EURUSD is down -0.26% overnight, trading around 1.22280.

USDJPY is up 0.35% in early session trading at around 110.833.

GBPUSD is down -0.15% to trade around 1.37701.

USDCAD is up 0.20%, trading around 1.24595.

Gold is down -0.34% in early morning trading at around $1,333.65.

WTI is down -0.17% this morning, trading around $63.72.

Major data releases for today:

At 10:00 GMT, Eurozone Consumer Price Index – Core (YoY) (Dec) will be released. The consensus is for an unchanged value of 1.1%. Consumer Price Index (MoM) (Dec) is expected to be 0.4% from 0.1% previously. Consumer Price Index (YoY) (Dec) is expected to be unchanged at 1.4%. Consumer Price Index – Core (MoM) (Dec) is expected at 0.2% from -0.1% prior. EUR pairs could see volatility pick up due to this data.

At 11:45 GMT, UK MPC Member Saunders is due to speak at the Financial Intermediary and Broker Association inaugural conference in London. GBP crosses could be moved by the comments made during this time.

At 14:15 GMT, US Industrial Production (MoM) (Dec) will be released. The consensus is for 0.4% from 0.2% previously. Capacity Utilization (Dec) is also released at this time with an expectation for 77.3% v 77.1% prior. USD crosses can be impacted.

At 15:00 GMT, US NAHB Housing Market Index (Jan) will be released with an expected reading of 72. The previous reading was 74. This release may affect USD pairs.

At 15:00, Bank of Canada Rate Statement will be made public. The Monetary Policy Report will be released and the Interest Rate Decision is expected to be 1.25% from 1.00% previously.

At 16:15, Bank of Canada Press Conference based on the decisions made earlier at 15:00 GMT.

At 19:00, US Fed’s Beige Book compiles anecdotal evidence from 12 Federal Reserve Banks regarding their local economic conditions.

At 20:15, US FOMC Member Mester will speak about Monetary Policy Communication at Rutgers University in New Jersey. Comments during the speech and during the following Q&A session afterwards could move USD pairs.

At 23:50, Japanese Foreign Investment in Japanese Stocks (Jan 12) will be released, with a prior reading of ¥597.9B. Foreign Bond Investment (Jan 12) will also be released at this time, with a previous reading of ¥173B.