EUROPEAN SESSION

In the European session, we don’t have much on the agenda other than a couple of low-tier releases like Spain’s unemployment change and Italy’s PPI. The data won’t change anything for the ECB, so the market reaction will be muted. 

As a reminder, the ECB is widely expected to hike at the upcoming meeting, but sources have already signalled that there’s low appetite to tighten further afterwards. The Eurozone core inflation data supports this case. 

AMERICAN SESSION

In the American session, we have the US ADP report and the Bank of Canada rate decision. The ADP is expected at 47K vs 44K prior, but it’s unlikely to move the market unless we get a huge downward surprise. That’s because the Fed is focused solely on inflation and it will need material deterioration in the jobs data to start worrying about the labour market.

The BoC is widely expected to keep interest rates unchanged at 2.25% and maintain its neutral stance. The most important development since the last meeting was the collapse in US-Canada trade talks and the imposition of tariffs. The BoC has previously mentioned that a trade war would be a negative driver for the economy and could require rate cuts. There’s just a 60% chance of a rate hike by year-end now and 93 bps of tightening priced in by the end of 2027. 

Traders will be focused on changes in the language. If the BoC shifts it focus more towards growth risk and makes dovish changes to the statement, then we should the Canadian dollar weakening further as the hawkish bets in 2027 get pared back. On the other hand, if the Bank keeps everything mostly unchanged, then we shouldn’t see much follow-through after the decision.

This article was written by Giuseppe Dellamotta at investinglive.com.



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