- Investors are anticipating Federal Reserve Chair Jerome Powell’s testimony.
- The ECB has promised to deliver a 50bps rate hike on March 16.
- The Bank of Canada will maintain its benchmark interest rate at 4.50%.
Currency futures rose on Friday amid dollar weakness. For the first time since January, the dollar index, which compares the dollar’s value to six significant rivals, had a weekly loss last week.
Investors are anticipating Federal Reserve Chair Jerome Powell’s testimony and the end-of-week jobs data, which will determine how hawkish the US central bank will be.
According to Mario Centeno, a member of the Governing Council of the European Central Bank, policy decisions following an increasingly likely 50 basis point (bps) increase in interest rates anticipated later this month must be grounded in data.
According to ECB President Christine Lagarde on Sunday, underlying inflation in the Eurozone will remain high in the short term, boosting the likelihood that a 50 bp increase will occur later this month.
The European Central Bank has increased interest rates by three percentage points since July, promising a further half-point increase on March 16.
On Friday, an uptick in market optimism more than made up for the growing yield gap between US and Canadian bonds. As a result, the Canadian dollar was able to bounce back and appreciate versus the US dollar. It rose 0.2% last week after a two-week decline.
During a policy meeting on Wednesday, investors expect that the Bank of Canada will end its interest rate increase campaign.
According to economists, the Bank of Canada will maintain its benchmark interest rate at 4.50% for the remainder of this year. The bank is likelier to adopt a hawkish stance on March 8 than a dovish one because inflation is still a concern.
Data from Canada showed an end to economic growth at the end of 2022, a weakening property market, weak business investment, and consumer expenditure. These trends signal that the 425 basis point BoC rate hikes over the previous year are beginning to take effect.
The pound rose on Friday due to data showing that economic activity surged in February at its fastest rate in eight months, confirming investors’ predictions that UK interest rates will continue to rise after March.
The pound increased by around 1% last week due to higher expectations for UK interest rates and Britain’s agreement with the EU over trading rules for Northern Ireland after Brexit.