FX Week Ahead - RBA Rate Decision; FOMC Minutes; Mexico Inflation; China Inflation; Canada Jobs

04/06 TUESDAY | 04:30 GMT | AUD RESERVE BANK OF AUSTRALIA RATE DECISION

The Reserve Bank of Australia meets for the third time in 2021, and the course remains the same: no interest rate movement for the foreseeable future. The perspective set forth by Governor Phillip Lowe at the December RBA meeting remains valid – insofar as the situation is still “better than expected.” Actions and words by the RBA and her policymakers have helped quell the rise in Australian government bond yields, corralling the long-end of the curve. Overall, rates markets don’t foresee any shifts in policy. According to Australia overnight index swaps, there is between a 16% to 25% chance of a rate cut through December 2021; the RBA will be keeping its overnight cash rate at 0.1% or lower for at least the next two years (through March 2023).

04/07 WEDNESDAY |18:00 GMT | USD MARCH FOMC MEETING MINUTES

The Federal Reserve’s March rate decision came and went without any significant change in policy, although Fed Chair Jerome Powell made sure to reiterate what has become a resilient stance of keeping policy on hold. But the March FOMC meeting also brought forth a new iteration of the Summary of Economic Projections (SEP) and dot plot, which likely entailed a great deal of discussion regarding providing ongoing monetary policy support as well as the timing of future moves. For the US Dollar, in a week without may other ‘high’ rated economic data releases or events, the release of the March FOMC meeting minutes may represent the best opportunity for volatility across the USD-spectrum over the coming days.

04/08 THURSDAY | 11:00 GMT | MXN INFLATION RATE (MAR)

According to a Bloomberg News survey, the January Mexican inflation rate (CPI) is expected to show an uptick from +3.76% to +4.15% (y/y). Moving into the base effect period around the start of the pandemic, higher inflation may serve to tamp down dovish machinations at Banxico in recent months (which runs against their longer-term reputation of being relatively hawkish compared to other regional central banks), giving the Mexican Peso further room to rally alongside other risk assets.

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