Bank of Canada Decides On Rates, Gold On The Rise

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A week of important financial data releases, including the European Central Bank’s (ECB) interest rate decision and the US Nonfarm Payrolls report has just begun. The Bank of Canada (BoC) monetary policy meeting will take place on Wednesday while Australian GDP data for the last quarter of 2023 will be scrutinised by analysts.

Gold prices rose close to a three-month top on Tuesday morning, trading above $2,120 per ounce. A set of disappointing US data published on Friday and comments coming from some Fed policymakers have lifted gold prices, while analysts see now June as a possible option for the first Fed rate cut.

Australia GDP Q4 2023 Report

On Wednesday morning, the Australian Bureau of Statistics (ABS) will release its fourth quarter 2023 GDP data report. Economists forecast that the GDP growth rate will likely rise to 0.3% on a month to month basis, but they also expect it to fall to 1.4% on an annualised basis.

An ING report published on February 29th said that “we have a 0.2% quarter-on-quarter forecast for 4Q23 GDP, but we have just had a positive private capex figure for the quarter so the risks to this forecast are already skewed to the upside. The contribution to GDP from net exports is released on 5 March, the day before the GDP release, which may also support an upgrade to the forecast, subject to assumptions about inventories, which we think will unwind this quarter after they lifted growth in 3Q23.”

Bank of Canada Interest Rate Decision

The Bank of Canada (BoC) is expected to announce its decision on interest rates on Wednesday afternoon. The consensus among economists is that the BoC will likely refrain from lowering rates at this point.

In its last meeting, the BoC’s board expressed its doubts whether the headline inflation could come down, reaching the bank’s 2% target this year. Some market analysts suggest that the BoC could start cutting rates in June, depending on inflation’s drop rate.

Desjardins’ senior economist Royce Mendes told CTV News financial reporters: “At the least I expect the Bank of Canada to take a more holistic view of the inflation indicators and to acknowledge the progress that we are seeing in taming underlying inflationary pressures. If they don’t, I would take that as a very, very hawkish signal.”

Tokyo CPI February 2024 Report

According to the Japanese Statistics Bureau, Tokyo CPI rose 2.6% on a yearly basis from 1.8% in January. This was the first time headline Tokyo CPI rose in the last three months. Tokyo CPI ex Fresh Food, Energy fell to 3.1% on an annualised basis from 3.3% in the first month of the year.

Japan’s Finance minister, Yoshitaka Shindo, told news reporters that “the government will strive to ensure Japan sees wage growth exceeding inflation, so that the economy would not revert to a period of prolonged price declines.” Japan’s Deputy Chief Cabinet Secretary Hideki Murai said that the Bank of Japan (BoJ) is to decide when it would like to end negative rates, adding that wages gradually rise as well as the economic growth rate.

US ISM Services PMI February 2024

The Institute for Supply Management (ISM) will publish its Service PMI figure for the month of February on Tuesday. Market analysts suggest that the PMI figure will come in at 53.0, lower than the 53.4 figure recorded in January but still indicating expansion.

A reading above 50 indicates that the services sector is expanding, which could boost the US Dollar (USD). A reading below 50 signals that services sector activity is declining, making the US currency weaker.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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