The Week Ahead in FX (Sept. 6 – 10): RBA, BOC & ECB Decisions All Lined Up

We’ve got three central bank decisions lined up this shortened trading week.

Read on to see what’s expected from the RBA, BOC and ECB statements.

Don’t forget to review which factors drove forex market price action last week, too.

Major Economic Events:

RBA monetary policy decision (Sept. 7, 4:30 am GMT) – The Australian central bank is widely expected to keep interest rates on hold at 0.10% this week.

Downbeat remarks might be in the cards, considering how the Australian government placed a number of states back in lockdown over the past month.

Also note that GDP fell short of estimates in Q2, slowing from the previous period’s 1.9% expansion to just 0.7%. Although the jobless rate also declined, it was mostly due to a slump in labor force participation.

With that, RBA policymakers might also delay their taper plans, as they cited in the minutes of their earlier meeting that they could adjust to any “significant setback” for the economy.

ZEW economic sentiment index (Sept. 7, 9:00 am GMT) – Germany and the euro zone will be printing the results of the ZEW economic sentiment survey for the current month.

Germany’s reading is slated to slide from 40.4 to 30.2 while the entire region could see a decline from 42.7 to 35.3, reflecting weaker optimism for September.

BOC interest rate statement (Sept. 8, 2:00 pm GMT) – No actual interest rate changes are expected from the Canadian central bank.

BOC officials would likely sit on their hands ahead of the national elections and after seeing the unexpected 1.1% GDP contraction in Q2.

Also keep in mind that number crunchers are predicting a monthly GDP contraction for July mostly due to the disruption in the auto industry supply chain and weaker residential investment.

ECB monetary policy statement (Sept. 9, 11:45 am GMT) – The ECB is expected to keep rates and bond purchases unchanged as well.

Analysts are divided on whether or not the central bank is likely to make taper plans, as the PEPP is scheduled to finish in Q1 next year.

Scaling down the size of the purchases could make for a smoother transition to their regular QE program, but policymakers might still decide to defer any actual decision until later this year.

Don’t forget that updated staff forecasts are also up for release this time, so any significant revisions to growth and inflation forecasts could impact taper speculations.

Canadian jobs report (Sept. 10, 12:30 pm GMT) – Another potential mover for the Loonie this week is the employment report, which is projected to show a slower 75K gain in hiring versus the earlier 94.5K increase.

Still, this should be enough to bring the unemployment rate down from 7.5% to 7.3% in August.

Forex Setup of the Week: GBP/AUD

With the RBA likely to sound less chipper in their upcoming statement, I’m looking out for a potential Aussie selloff this week.

GBP/AUD seems to be gearing up for another trend line bounce on its long-term chart, especially since the potential support area lines up with several inflection points.

The 50% retracement level coincides with the 100 SMA dynamic support while the 61.8% Fib is closer to the rising trend line near the 1.8300 handle.

Oh, and did I mention that it’s right smack in line with an area of interest or former resistance zone, too?

Stochastic is already dipping into the oversold region to reflect exhaustion among sellers, so turning higher would confirm that buyers are returning.

If they’re strong enough, they could push GBP/AUD back up to the swing high soon!

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