Central Bank Watch Overview:
- RBNZ is already raising rates Early this month, An additional 25bps rate hike will be priced in November.
- in the meantime, BOC is becoming more hawkish. Otherwise, RBA Looks like on hold For a foreseeable future.
- Retail company positioning The short-term outlook suggests that it is bullish for a trio of major commodity currencies.
Central bank regains calm
This Central Bank Watch is looking at interest rate markets around the Bank of Canada, the Reserve Bank of Australia and the Reserve Bank of New Zealand. After mid-year concerns about delta variants, all three major commodity currency central banks appear to be regaining their nerves to move towards withdrawing stimulus. RBNZ raised interest rates in October, but interest rate markets have moved forward BOC rate We will raise the odds in the first half of 2022. Otherwise, the RBA will remain the most dovish in the trio.
For more information on central banks, please visit: DailyFX Central Bank Release Calendar.
Bank of Canada is approaching withdrawal of stimulus
Almost a month has been removed from Inflation after Canadian federal elections Continue execution More than expected, the Bank of Canada is likely to soon resume its stimulus withdrawal efforts. When we meet later this month.. Currently, asset purchases are made at a rate of $ 2 billion per week. Soaring following stunning September Canadian employment data Energy Prices-Energy accounts for about 11% of Canada’s GDP-There is reason to believe that the economy is less slack than expected Mid-year.
Bank of Canada Interest Rate Forecast (October 14, 2021) (Table 1)
Rate hikes are still months away, but the resumption of stimulus withdrawals seems to have spurred speculation that the BOC will act faster than previously expected when it comes time to raise rates.of slow-September, there was 56Probability of rate hike of 25 bps% By April 2022. now, Mid-October, Canada Overnight Index Swap that is Pricing 101%probability (100% probability for a 25 bps rate hike, 1% probability for a 50 bps rate hike).
IG Client Sentiment Index: USD / CAD Rate Forecast (October 14, 2021) (Chart 1)
USD / CAD: According to retail trader data, 70.65% of traders are net long and the ratio of long to short traders is 2.41 to 1. The number of Netlong traders is 8.51% lower than yesterday and 4.19% higher than last week. Traders’ net shorts are 7.97% higher than yesterday and 15.93% higher than last week.
Still, traders have less net longs than yesterday, compared to last week. Recent sentiment changes warn that the current US dollar / Canadian dollar price trend could soon reverse, even though traders remain netlong.
Reserve Bank of Australia “Lower for Longer”
Last month A $ 3 billion weekly asset purchase cuts at a meeting of the Reserve Bank of Australia., However Central bank at the same time The QE program will be extended from November 2021 to February 2022. continue Trade friction with China, its largest trading partner, continues, Concerns around China real estate sector Swirling, The market is Expectations The RBA will delay further stimulus withdrawal efforts in the short term.
Reserve Bank of Australia Interest Rate Forecast (October 14, 2021) (Table 2)
The “lower, longer” stance of quantitative easing has led to lower expectations of a rate hike soon afterwards. Of course, the taper isn’t tightened, but it has long been understood that RBA’s QE program will taper completely before rate hikes. By December 2021, interest rates could be cut by 29%, down from 29% at the end of September, according to Australia’s Overnight Index Swap.
“NNonetheless, the RBA has previously promised to keep interest rates below current levels for three years starting March 2020, maintaining record highs. Australian dollar Shorts in the futures market will cause drastic price changes in Australia’s rate odds with only minor changes in market conditions, such as improved trade relations with China, reduced pressure on base metals, or the end of lockdowns. There is a possibility. This can lead to a fairly short cover rally by Australia.“
IG Client Sentiment Index: AUD / USD Rate Forecast (October 14, 2021) (Chart 2)
AUD / USD: According to retail trader data, 47.12% of traders are net long and the ratio of short to long traders is 1.12: 1. The number of Netlong traders is 11.88% less than yesterday and 9.02% less than last week. Traders’ net shorts are 8.71% higher than yesterday and 0.33% higher than last week.
We usually disagree with the sentiment of the crowd, and the fact that traders are net shorts suggests that AUD / USD prices may continue to rise.
Traders are even more short of nets than yesterday or last week, and the combination of current sentiment and recent changes has strengthened the AUD / USD bullish contrarian trading bias.
RBNZ got off to a good start, sure
Now that the New Zealand government has abandoned its “zero-covid” policy, policy makers are learning to live with the virus as well. At the RBNZ meeting in October, there is evidence of a 25 bps rate hike and further containment of the COVID-19 infection, and the market believes the market will continue to fulfill its promise that the RBNZ will tighten its policies further by the end of the year.
Reserve Bank of New Zealand Interest Rate Forecast (October 14, 2021) (Table 3)
Prior to the RBNZ meeting in October, “mNew Zealand’s overnight index swap pricing could rise by 25 bps by 190% by the end of the year, and Arcets categorically insists that interest rates will move by the end of the year. In other words, there is a 100% chance of a 25 bps rate hike and a 90% chance of a 50 bps rate hike.With a 25bps rate hike on books, the market is stabilizing expectations. Overnight Index Swaps in New Zealand are currently priced with a 91% chance of an additional 25 bps rate hike.
IG Client Sentiment Index: NZD / USD Rate Forecast (October 14, 2021) (Chart 3)
NZD / USD: According to retail trader data, 50.18% of traders are net long and the ratio of long to short traders is 1.01 to 1. The number of Netlong traders is 12.03% less than yesterday and 20.80% less than last week. Traders’ net shorts are 10.39% lower than yesterday and 11.82% lower than last week.
We usually disagree with the sentiment of the crowd, and the fact that traders are netlong suggests. NZDThe price of / USD may continue to fall.
Still, traders have less net longs than yesterday, compared to last week. Recent sentiment changes warn that the current NZD / USD price trend could soon reverse, even though traders remain netlong.
— Written by Christopher Vecchio, CFA, Senior Strategist
BOC, RBA, and RBNZ interest rate forecast updates
Source link BOC, RBA, and RBNZ interest rate forecast updates