Week Ahead in FX (Sept. 4 – 8): New Policy Decisions From RBA and BOC

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A brand-spankin’ new trading month means that we’ll hear another round of policy decisions from the major central banks!

This week, we have the RBA and the BOC on tap plus a couple of closely watched reports from China and the U.S.

Before all that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!

And now for the closely-watched economic indicators on the calendar this week:

RBA’s policy decision

In its August decision, the Reserve Bank of Australia (RBA) surprised the markets by keeping its interest rates steady at 4.10% and hinting that future decisions will be data-dependent.

On August 5 at 4:30 am GMT, markets see the central bank keeping its interest rates steady for another month. Inflation-related reports such as the CPI, PPI, and wage price index are reflecting subdued price pressures while downbeat Chinese PMIs could result in weaker commodity exports for Australia.

Check out the Event Guide on RBA’s Decision to see which pairs may likely move during the event!

U.S. ISM services PMI

Last Friday, the U.S. dollar dipped in reaction to the August jobs report showing a higher unemployment rate and lower than expected average earnings. For newbies out there, a weak jobs data decreases the odds of the Fed raising its interest rates further.

The ISM services PMI on September 6 at 2:00 pm GMT may give us clues on whether the labor market miss is a legit concern.

Markets expect the PMI to slow down from 52.7 to 52.5 but a much lower reading could inspire another round of USD selling.

BOC’s policy decision

After taking its overnight rate from 0.25% to 5.00% between March 2022 to July 2023, the Bank of Canada (BOC) is expected to keep its interest rates steady in September.

Like the Fed and the RBA, the BOC may likely adopt a wait-and-see approach before making its next policy changes.

Keep your eyes peeled on September 5 at 2:00 pm GMT for talks about being data dependent. We may even see hints of keeping its interest rates higher for longer or not putting rate cuts on the table in the foreseeable future!

China’s inflation data

On September 9 at 1:30 am GMT, the world’s second-largest economy is expected to print the annualized readings of its consumer and producer prices.

Analysts generally see another slowdown in prices, with annual consumer prices likely decelerating at a faster 0.4% y/y rate compared to its July 0.3% decrease. The monthly reading is expected to register a 0.3% uptick after a 0.2% increase in July.

Meanwhile, producer prices could dip by another 3.0% y/y, which is a bit slower than the -4.4% y/y reading in July.

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