Central Bank Watch Overview:
- Rapidly rising growth and inflation expectations have started to spook growth-related assets, including aspects of the FX world, as hotter price pressures could lead to tightening from central banks.
- Nevertheless, none of the three major central banks tied to the commodity currencies (AUD[1], CAD[2], NZD[3]) have seen rate odds change materially.
- Retail trader positioning[4] suggests bullish biases for each of AUD/USD[5], NZD/USD[6], and USD/CAD[7] rates.
Central Banks Not Acting, Rates Markets Active
In this edition of Central Bank Watch, we’re examining the rates markets around the Bank of Canada, Reserve Bank of Australia, and Reserve Bank of New Zealand. The former two have convened in 2021, and both the BOC and RBA have more or less turned down the temperature on expectations for negative interest rates. The RBNZ will finally meet for the first time this year next week, but similarly, are likely to paint a positive picture of the economy.
All three central banks are contending with the fact that rising global growth expectations and an aggressively dovish Federal Reserve have seen the US Dollar[8] lose ground to the trio of commodity currencies. It wouldn’t be a surprise to hear more complaints from the BOC, RBA, and RBNZ about how frustrating it is that their local currencies are continuing to appreciate.
For more information on central banks, please visit the DailyFX Central Bank Release Calendar.[9]
Bank of Canada Complains About Fed
The BOC doesn’t meet again for almost a month, but when policymakers held rates at the January meeting, it wasn’t just a hold. Indeed, BOC Governor Tiff Macklem used direct language when discussing the Canadian Dollar’s months-long
