Week Ahead: BoC May Hike One Final Time; Will Flash PMIs Spread Gloom or Optimism
XM Group | Jan 20, 2023 09:37AM ET
BoC to ponder one last rate hike
After having spent much of the last year front loading rate hikes, many central banks are now nearing the end of their tightening cycle and this theme is likely to dominate at least the first half of 2023. The Bank of Canada could take the lead in pausing rate hikes when it meets on Wednesday, but in all probability, it will raise its overnight rate by 25 basis points to 4.50% in one final tightening round.
The aussie will also be keeping an eye on the flash PMIs and business confidence figures on Tuesday.
As for the kiwi, it’s likely to benefit more substantially from stronger-than-expected CPI prints as investors have priced in about a 25% chance of a bigger 75-bps rate increase by the Reserve Bank of New Zealand at its February gathering. The RBNZ’s cash rate is seen peaking well above 5% and at the current level of 4.25%, the bank could be hiking long after its peers have paused, so any upside surprises are likely to boost the local dollar.
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