The trading week ahead – Central banks back in action RBA, BoC

Debt ceiling issues finally being put to rest last week saw a broad rally in US and global, with a big move up on Friday seeing the S&P 500 have its best week since March and hit it’s highest level since August last year.

With Asian and US futures pointing to positive start to the week the risk on narrative seems to be continuing and with US data fairly light on the ground until next week’s pivotal FOMC decision focus will be on two Central banks and their rate decisions this week, the RBA and Bank of Canada.

Australia – RBA rate decision – Tuesday

The RBA rate decision on Tuesday is looking to be an interesting one, markets had been pricing in almost no chance of a hike as little as a week ago, that changed dramatically with last weeks shock CPI figure with odds rising to 38% that we may see another 25bp hike out of the RBA this week. It is a tough one to call with inflation rising again in April, it is going to be very hard for the RBA to sit on the sidelines this week bringing into play a definite possibility of a 25bp hike, either way AUD will see some volatility and with the risk on tone seeing AUDUSD break back into is Mar/Apr range last week should create some good trading opportunities.

Source: ASX rate tracker

Canada –  BoC rate decision – Wednesday

The consensus for the BoC rate decision on Wednesday is for no change, but after stronger than expected consumer price inflation and GDP and with the labour data remaining robust the market is pricing a 41% chance of a 25 bp hike this week. The BoC last raised rates on 25 January and has held them at 4.5% since then. The last statement warned that they were prepared to raise the policy rate further to ensure inflation returns to 2% which gives very good argument for another hike this week, or a hawkish pause, either one should give the CAD a further bullish tailwind after a very strong week, strong oil prices could also be another factor for the CAD.

Source: Bloomberg

Commodities – OPEC+ meeting – Monday

Crude oil has surged at Mondays open after the conclusion of the June OPEC+ meeting on Monday morning AEST with OPEC+ members in Vienna agreeing to extend crude production cuts into 2024 and Saudi Arabia Making an additional 1 Million Bpd voluntary production cut. US crude oil gapped up  3% on Mondays open to test two week highs. Output cuts and a risk on market should give strong support to oil this week.

Full calendar of major economic announcements below: