The Bank of Canada interest rate decision (BoC) will find itself in focus later today, as investors and traders eagerly await the preliminary report on US GDP for the fourth quarter of 2022, due out tomorrow.
The Australian Bureau of Statistics (abdominal muscles) announced that inflation hit a 32-year high in the fourth quarter of 2022, settling at 7.8% year-on-year. Australian treasurer Jim Chalmers has said inflation is unacceptable.
In other news, the leaders of Microsoft noted that sales rose just 2% in the fourth quarter of 2022, to $52.7 billion. This is the lowest quarterly increase since 2016.
Tesla (TSLA) is expected to release fourth quarter 2022 and full year 2022 financial results after market close. Its executives said the company delivered 409,000 EVs in the fourth quarter, a record for deliveries, but some market analysts suggest the figure is lower than expected.
The Bank of Canada regulates interest rates
Later today, the Bank of Canada will announce its decision on the matter interest rate. A Reuters poll found that economists expect interest rates to rise by 25 basis points. At its last meeting in December, the Bank of Canada board said that “we will examine whether the key interest rate needs to be raised further to rebalance supply and demand and bringinflation to the target.” The astonishing 50bp hike had traders believing the BoC had ended its round of monetary policy tightening, leading to a sell-off in the Canadian dollar.
Last week, a survey by Statistics Canada it revealed that headline inflation fell to 6.3% year-on-year in December. The BoC’s plan is to bring inflation back close to its 2% target. ING analysts suggest that “the Bank of Canada is expected to hike rates one last time on Wednesday with a 25 basis point hike, taking the key rate to 4.5%. Economic activity is slowing, inflation is falling and what will likely be characterized as a lull in assessing the situation will mark the peak in rates.”
In their report released on Jan. 23, they also note that “finally, short of a very accommodative (no hike and claim that rates have peaked) or very aggressive (rise and signal for more hikes) outcome, the impact on DAC could prove to be rather short-lived”.
US durable goods orders are expected to increase
Thursday 26 January the United States Census Bureau will publish its report on durable goods orders of December. Market analysts expect a 2.1% increase. The November figure was -2.1%, well above forecasts of -0.6% and the biggest drop in 31 months.
Durable goods are goods intended to last three years or more, such as vehicles and electrical appliances. To the extent that the production of these durable goods may involve significant investment, they are sensitive to the US economic situation. A high positive number could strengthen the US dollar, while a negative number could weaken the US dollar.
US Q4 2022 Preliminary GDP Data: Will the US Dollar Strengthen?
The moment of truth will come on Thursday, January 26, when investors and traders will have the opportunity to collect the preliminary data of the GDP American. The Bureau of Economic Analysis (BEA) will release its Q4 2022 GDP report which some analysts say should show the US economy growing 2.8% year over year.
In general, a high or better-than-expected GDP growth rate boosts the value of the US dollar, while weaker data discourages traders and hurts the US currency. The US Federal Reserve (Fed) is closely monitoring GDP growth and the headline inflation rate as part of its monetary policy-tightening cycle. Some economists suggest the Fed will raise its key interest rate by 25 basis points at its next board meeting next week.
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