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Two Central Banks Will Grab Traders’ Attention
RBA Interest Rate Decision
December 6, 05:30 GMT+2.
The Reserve Bank of Australia will publish the monetary policy statement and announce the interest rate on December 6 at 05:30 GMT+2.
The rate statement is one of the central banks' essential tools to communicate with people about economic conditions. It contains information about factors influencing the regulator's interest rate decision and provides an economic outlook. Thus, the statement offers clues on further interest rate decisions.
In October, Australian inflation dropped to 6.9%. While this change demonstrates the first results of the regulator's tight monetary policy, the level is still high and requires the central bank's attention. The board is now considering no more than a 25-basis-point rate hike as medium-term inflation expectations and wage growth remains consistent.
- The AUD will strengthen if the bank makes a bigger-than-expected rate hike or hints at more tightening.
- Otherwise, the AUD will go lower.
Instruments to trade: AUDUSD, AUDJPY, AUDCHF.
BOC Interest Rate Decision
December 7, 17:00 GMT+2.
The Bank of Canada will make the monetary policy decision, which includes an update on interest rates on December 7 at 17:00 GMT+3.
This is one of the most important events for the Canadian currency because the central bank decides whether to raise the interest rate according to current economic conditions.
Recently, the Bank of Canada Governor Tiff Macklem said the inflation in Canada remains too firm, and higher interest rates might cool the overheated economy down. This is true: Canada's inflation rate was 6.9% in October, remaining unchanged from the previous month. The inflation surged due to higher transportation prices and soaring prices for energy and oil. As a result, we may expect the rate hike by 25 or 50 basis points this time.
Last time, the BOC raised the interest rate by 50 basis points. The Canadian dollar erased all previous daily gains after the update.
- If the bank hints at monetary policy, the CAD will strengthen.
- Otherwise, the CAD will go lower.
Instruments to trade: USDCAD, CADJPY, EURCAD.
US Producer Price Index
December 9, 15:30 GMT+2.
The US Bureau of Labor Statistics will release the Producer Price Index (PPI) on December 9 at 15:30 GMT+2. This is the change in the number of finished goods and services sold by producers. There are two versions of this indicator: headline and core. The core one excludes food and energy prices due to their volatility.
In October, the US headline PPI increased 0.2%, the same as in September, and underperformed the 0.4% forecast. EURUSD strengthened on the release but fell quickly after forming a double-top pattern on the M30 chart. Traders follow inflation changes as they push the Fed to take action. So, in November, the contraction in published prices indicates that the Fed's policy achieved results.
- If the release is greater than the forecasts, the USD will rise.
- If the release is weaker than the forecasts, the USD will fall.
Instruments to trade: EURUSD, XAUUSD, USDJPY.
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