Weekly Comment – FOMC and BoC interest rate decision in the spotlight

Stocks continued their selloff as demand for tech and high-growth companies has declined on the back of rising Treasury yields and geopolitical tensions in Eastern Europe. In the upcoming week, interest rate decisions from America and Canada will take center stage, together with updates on global economic activity from American, European, British and Japanese purchasing managers indices.


In America, the Fed will conclude its first FOMC meeting for the year on Wednesday, with Fed Chair Powell anticipated to set the timetable for multiple interest rate hikes in 2022. However, the market is already pricing four rate hikes, leaving little scope for a USD upside.

Moreover, the Bank of Canada will also conclude its monetary policy meeting on Wednesday, with markets currently pricing in an 85% probability for a rate hike. However, with wage growth below its pre-pandemic levels and surging Omicron cases the BoC could decide to play safe, hurting the CAD.

Flash PMI data for January in the Eurozone, US, UK and Japan will hit the markets on Monday, revealing how global demand for goods and services is holding up. Also, fourth quarter US GDP estimates will be released on Thursday, posing a risk for disappointment after the poor retail sales report for December.

Oil reached a seven-year high this week before witnessing a minor pullback due to the unexpected rise in US crude inventories. Gold is expected to close the week in the green as demand for safe-havens increases.

Wall Street took another sharp hit this week, with Nasdaq officially entering correction territory. However, if risk-off sentiment improves, bargain hunters could soon come to the rescue.

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