FX Week Ahead: UK & Canadian CPI; FOMC, BOJ, & BOE Meetings

Talking Points:

  • Inflation data from Canada and the UK are due out on Wednesday, and the path of future rate hikes may be at stake if the decline in energy prices begins to undermine price pressures.
  • Three central bank rate decisions will drive volatility mid-week: the Federal Reserve on Wednesday; and the Bank of Japan and the Bank of England on Thursday.
  • The US federal government appears to be headed towards a shutdown at the end of the week after a contentious meeting between US President Trump and Democratic Congressional leadership.

12/19 WEDNESDAY | 09:30 GMT | GBP CONSUMER PRICE INDEX (NOV)

UK economic data has gone under the wire in recent weeks as the rollerc oaster Brexit negotiations have been a black hole for attention. Yet in the days ahead of the December Bank of England policy meeting, traders will be paying attention to the November inflation report due out on Tuesday. Headline inflation is due in at +2.3% from +2.4% (y/y), and the monthly reading is due in at +0.2% from +0.1% (m/m). Core CPI is expected to have dipped to +1.8% from +1.9% (y/y).

Evidence that inflation is moderating should be neither a positive or negative catalyst for the British Pound, especially as both core and headline inflation remain between +2 and +3%. While there is no immediate implication on BOE policy, the fact of the matter is that the BOE has been sidelined for some time now amid the Brexit negotiations, and is quickly approaching the event horizon when which it will have to start making its monetary policy data dependent again (Q2’19).

Pairs to Watch: EUR/GBPGBP/JPYGBP/USD

12/19 WEDNESDAY | 13:30 GMT | CAD CONSUMER PRICE INDEX (NOV)

The sharp decline in energy prices since the start of October will make itself apparent in the upcoming round of November Canadian inflation. Canadian economic activity is sensitive to shifts in oil prices, given that approximately 10% of GDP is derived from oil-related activity. As such, headline CPI is due in at +1.8% from +2.4% (y/y), a stark decline underscored by the expected month-over-month reading of -0.4% from +0.3% previously.

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