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Updated interest rate forecasts for the Bank of Canada, the Reserve Bank of Australia and the Reserve Bank of New Zealand -by Ecork

Central Bank Monitoring Overview:

  • All central banks operating in commodity currencies are expected to raise interest rates by at least 50 basis points at their upcoming meetings.
  • In line with the Fed’s pace, the Bank of Canada is expected to rise 75 basis points in July.
  • Retailer centering It indicates that AUD/USD rates have a bearish slope, NZD/USD rates have a neutral bias, and USD/CAD rates have an upward slope.

Low commodity prices don’t matter much

In this edition of the Central Bank Watch, we examine the rate markets around the Bank of Canada, the Reserve Bank of Australia, and the Reserve Bank of New Zealand. Despite the dip in commodity prices in recent weeks – from copper to oil and wheat – multi-decade high inflation still fuels speculation that major central banks will continue to raise interest rates rapidly in the coming months. The Bank of Canada, the Reserve Bank of Australia and the Reserve Bank of New Zealand are all expected to raise their key rates by at least 50 basis points in July.

For more information about central banks, please visit DailyFX Central Bank Issue Calendar.

75-bps incoming boost?

Price pressures continue to rise in Canada, despite aggressive measures taken by the Bank of Canada in recent weeks to stem the rapid rise in the cost of living. The Bank of Canada’s June policy statement included the phrase “the Board of Directors is prepared to act more aggressively if necessary to meet its commitment to achieving the 2% inflation target,” and rates think marketsLooming more severe tightening processes When policymakers meet in mid-July.

Bank of Canada Interest Rate Forecast (June 21, 2022) (Table 1)

After a BOC of 50 basis points earlier this month, price markets are expecting an accelerated pace of tightening immediately. The odds of a rate hike for the July meeting have risen in recent weeks: There is a 281% chance of a 25bp rate hike (100% chance of a 25bp rate hike, 100% chance of a 50bp rate hike, 81st chance % to raise the interest rate by 50 basis points). Currently at 1.50%, the Bank of Canada’s key interest rate is on track to rise to 2.25% next month.

IG Customer Confidence Index: USD/CAD Price Forecast (June 21, 2022) (Chart 1)

Central Bank Monitoring: BOC, RBA, &  Update the Reserve Bank of New Zealand's interest rate forecast

USD/CAD: Retail trader data shows that 31.52% of traders are net long with the ratio of short to long traders at 2.17 to 1. The number of long-term traders is 11.08% lower than yesterday and 32.32% lower than last week, in While the number of short traders is 8.09% higher than yesterday, and 64.83% higher than last week.

We usually take a conflicting view with crowd sentiment, and the fact that traders are tight on the trade indicates that USD/CAD prices may continue to rise.

Traders were much more net-zero than yesterday and last week, and the combination of current sentiment and recent changes is giving us a bullish mixed trading bias for the USD/CAD.

RBA Minutes: Expect More Rallies

The minutes of the June meeting of the Reserve Bank of Australia strongly hinted at a strong pace of rate hikes, after the Reserve Bank of Australia imposed a surprise 25 basis point rate increase in May and a 50 basis point rate hike earlier this month. RBA Governor Philip Lowe recently said that a 50 basis point rate hike is expected in July, as the Australian economy continues to see an incredibly strong labor market with minimal concerns about a recession in the coming months.

Reserve Bank of Australia Interest Rate Forecast (21 June 2022) (Table 2)

Central Bank Monitoring: BOC, RBA, &  Update the Reserve Bank of New Zealand's interest rate forecast

According to Australia Overnight Index Swaps (OIS), there is a 175% chance of a 25bp rate hike in July (100% chance of a 25bp rate hike and 75% chance of a 50bp rate hike). But the sharp shift in RBA rate hike prospects is better reflected when looking to the end of 2022: in April, the RBA’s key rate was expected to rise to 2.00% by the end of the year; Final price is now discounted at 3.566%.

IG Customer Confidence Index: AUD/USD Price Forecast (21 June 2022) (Chart 2)

Central Bank Monitoring: BOC, RBA, &  Update the Reserve Bank of New Zealand's interest rate forecast

AUD/USD: Retail trader data shows that 70.15% of traders are net long with the ratio of long to short traders at 2.35 to 1. The number of long-term traders is 7.55% higher than yesterday and 7.89% higher than last week. While the number of short traders is 4.75% lower than yesterday and 11.15% less than last week.

We usually take a conflicting view with crowd sentiment, and the fact that traders are net indicates that AUD/USD prices may continue to fall.

Traders are long longer than yesterday and last week, and the combination of current sentiment and recent changes is giving us a stronger bearish contrarian trading bias between the Aussie and the US Dollar.

The Reserve Bank of New Zealand is not done

The Reserve Bank of New Zealand has been on the path of a rate hike war for the first six months of 2022, and tough tightening measures are expected to press ahead – even as economic data continues to deteriorate. As a reminder, the RBNZ’s monetary policy shift is not just about inflation, it’s also about house prices. Not only is the RBNZ expected to raise rates at every meeting through February 2023, but the pace of rate hikes is expected to accelerate going forward.

Reserve Bank of New Zealand Interest Rate Forecast (21 June 2022) (Table 3)

Central Bank Monitoring: BOC, RBA, &  Update of the Reserve Bank of New Zealand's interest rate forecast

There is a 213% chance that the RBNZ will raise rates by 25 basis points next month (100% chance of a 25 basis point rate hike, 100% chance of a 50 basis point rate hike, 18% chance of 75 basis points). basis – bps rate hike) followed by a 270% increase from 25 bps in August (100% chance of a 25 bps rate hike, 100% chance of a 50 bps rate hike, and a 70% chance of a rate hike 75 basis points). Current rates suggest that the RBNZ’s key rate will rise from 2.00% to 3.25% before the calendar comes in September.

IG Client Sentiment Index: NZD/USD Price Forecast (June 21, 2022) (Chart 3)

Central Bank Monitoring: BOC, RBA, &  Update the Reserve Bank of New Zealand's interest rate forecast

NZD/USD: Retail trader data shows 69.81% of traders are net long with the ratio of long to short traders at 2.31 to 1. The number of long-term traders is unchanged from yesterday and 16.84% higher than last week, while the number of long-term traders is unchanged from yesterday and 16.84% higher than last week, while the number of long-term traders is unchanged from yesterday and 16.84% higher than last week. The net short is 7.46% higher than yesterday and down 23.81% since last week.

We usually take a conflicting view with crowd sentiment, and the fact that traders are net indicates that NZD/USD prices may continue to fall.

Positioning is less net than yesterday but more net buy than last week. The combination of current sentiment and recent changes gives us more mixed bias in NZD/USD trading.

— Written by Christopher Vecchio, Chartered Financial Analyst, Chief Strategist

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