This week, most major central banks are set to announce key interest rate decisions. The Bank of Japan will begin on Tuesday and similar to all other rate decisions it is not expected that rates will be adjusted. In Japan, on the other hand, the recent communication pointed out that rates might be hiked if the economy allows. The weakness of the JPY has stalled for the past two weeks. A more hawkish outlook could then boost the Yen again causing JPY- related pairs to weaken again.

Rate cuts, which also include the Federal Reserve from the US, are highly unlikely currently as the war against Iran started to cause inflationary momentum to rise again. Central Banks might hence remain on hold. Yet, their outlook might offer important insights. Volatility might start to rise in the FX market again. Potential statements for further Central Bank action should be taken as important guidance for the upcoming weeks. Also, the designated nominee for the Fed, Kevin Warsh, pointed out before the Senate during his recent testimony, that he wants to overhaul the Fed when in office. His policies should be expected to initially support the Dollar and also act strongly upon inflation.

Important events this week:

– CA BoC rate statement– It is expected that the Bank of Canada will leave the interest rate at the current 2.25%. While the last rate cut was implemented in October last year the current pressure of inflation might also cause the Bank to react. However, last week’s consumer price index from Canada showed that prices were rising but less as compared with the forecast. The median reading stabilized at 2.3%.

EURCAD weekly chart

After the initial rise from early April, the EURCAD currency pair began to fall again. The strength of the CAD is also visible against other currencies. As shown in the chart above, the currency pair broke back below the 50- moving average zone based on the weekly chart. If the market will now be able to also break below the 1.6000 support zone the bearish momentum might continue. Any hawkish statement from the BoC might support such view. The interest rate decision will happen on Wednesday, 29^th of April at 15:45 CET.

– US rate decision– The interest rate decision of the FOMC will likely be the last one with Jerome Powell on the helm of the Central Bank. Given the war with Iran as well as the recent statements of the chair, no rate cut should be expected. Instead, the hawkish tone might actually increase. On another note, consumer prices as well as producer prices came out slightly weaker during their last reading.

AUDUSD daily chart

The AUDUSD currency pair is currently particularly interesting. Firstly, the pair is offering insights into the general risk sentiment. Alongside the rise in the equity market also the AUD was gearing up steam. The technical resistance zone at 0.7200 should hence be observed. Secondly, potential fresh strength of the Dollar might cause the pair to weaken. A break below the 0.7120 support level might then show more pressure to the downside. The pair might hence be influenced in both directions. The rate decision will be released on Wednesday, 29^th of April at 20:00 CET.