A Central Bank Extravaganza
The first central bank decision is Japan. There's no set time for the BOJ but it's generally between 0230 GMT and 0330 GMT. A tip-off toward any surprise generally comes with a later release. We've heard some chatter about more easing but nothing from the BOJ suggested a shift. Instead, Kuroda will likely lower the inflation outlook to 1.3% from 1.7% for FY2015 but blame oil and leave 2016 unchanged at 2.1%. A one-year extension in the bank lending facility and measures to strengthen the facility have been leaked and shouldn't be a surprise.
In Europe, ECB expectations have grown so substantial and concrete that it leaves Draghi with little room to surprise and traders are fearful about euro selling on the 'fact' afterwards. However, if the amount of buying is left ambiguous or open-ended, it's a green light for fresh selling.
In Canada, USD/CAD rose to a fresh 5-year high above 1.21 with the BOC decision looming. Another nearly 5% drop in oil along with a soft manufacturing sales report (-1.4% vs -0.7% exp with downward revisions) were catalysts for the move but positioning ahead of Poloz was another factor.The BOC is likely to follow the IMF's lead in revising down Canadian growth forecasts but a key with Canada's central bank is the output gap. Last week Lane hinted the return to full capacity in the economy could be threatened and with oil down another $22 since the last BOC decision, there's a good chance of a shift to dovish from neutral. If so, the upside in USD/CAD continues to look attractive.
|Manufacturing Shipments (NOV) (m/m)|
|-1.4%||-0.7%||-1.1%||Jan 20 13:30|
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