Weekly Outlook | Inflation Data And Boc In Focus

After a mixed week of trading last week markets will now focus on important upcoming news events. While Tuesday’s consumer price index from the United States might offer fresh insights into Central Bank policy the focus will then shift towards Canada. It is expected that the Bank of Canada will leave interest rates unchanged. Last week’s positive employment data might also support such view.

Apart from the above also producer prices from the United States might be interesting. Due to the war with Iran prices were rising and such move might continue to put the Central Bank on alert. Fed chair Kevin Warsh has pointed out that the utmost importance for the Fed will now be to bring inflation down.

On Friday last week the US- dollar started to gear up fresh momentum again and the incoming data this week, especially from the U.S., might offer more clarity for current moves. Rising CPI and PPI figures might support the bullish trend for the Greenback moving forward.

The war between the U.S. and Iran remains above all. Oil prices started to rise again slightly and the increase of the conflict might push prices higher again also causing a threat to the equity market. In general, the risk sentiment remains positive with stocks pushing higher and also the crypto market moving to the upside.

Important events this week:

– US consumer price index– the consumer price index is not the most important set of data used by the Federal Reserve to determine their interest rate moving forward. Yet, with the focus on inflation, traders in particular might use it for further insights into the momentum of the dollar. The core cpi rate is expected to come down to 2.8% from 2.9% last month. A weaker reading might put renewed pressure on the dollar.

EURUSD weekly chart

The weekly chart above remains at interesting levels. The focus should be on the 1.1400 handle, which currently marks an important support zone. If the price can stay on top of that range the EUR might continue to gear up strength and push higher. However, a stronger cpi reading might eventually push the market lower. The EURUSD currency pair might then move lower towards the 1.1200 range. The cpi data will be released on Tuesday, 14^th of July at 14:30 CET.

– CA BoC interest rate decision– The Bank of Canada had left interest rates unchanged throughout the year despite the recent pressure of inflation. The inflation data from June increased by 1.0%, which was higher than forecasted. Hence the Central Bank might offer a rather hawkish outlook for now. Such move would generally support the strength of the Loonie as well.

USCAD weekly chart

Based on the weekly chart above the market will likely break out of the current trading range. A push higher might occur mainly due to the strength of the dollar. A break above 1.4200 might then push the pair towards the 1.4500 price range. Yet given the recent strength of the Greenback, a correction to the downside remains overdue. If the 1.4100 level breaks, positive momentum for the CAD might follow. In particular a hawkish outlook of the BoC might bring the price down. The rate decision will occur on Wednesday, 15^th of July at 15:45 CET.