Central banks preview: What to expect from the BoC and ECB this week?

Last week, ECB President Lagarde suggested that disinflation would persist and emphasised the need for more evidence before price increases can return to the ECB’s 2% inflation target rate. The bank is expected to keep its main refinancing rate unchanged at 4.5%. Canada, meanwhile, is widely expected to keep its rate unchanged at 5% this week. it comes after inflation there fell 2.9% in January. The BOC has paused raising rates at its last four meetings.

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The Bank of Canada

Investors will be closely watching the Bank of Canada's and the European Central Bank's interest rate decisions this week. The European Central Bank (ECB) recently mentioned that inflation is not picking up as expected, so they need more evidence before they can reach their desired inflation target. The ECB is anticipated to keep its main refinancing rate at 4.5%, along with unchanged deposit facility and marginal lending rates at 4% and 4.75% respectively. Inflation has been declining in major European economies like France, Germany, and Spain, and the overall Eurozone's inflation has dropped from 3.8% to 2.6% in February.

In Canada, the Bank of Canada is also expected to keep its interest rate at 5% after the country experienced a decline in inflation of 2.9% in January. During their last four meetings, the Bank of Canada has already put rate increases on hold.

EUR/USD

Looking at the exchange rate between the EUR/USD, it showed a rebound on Friday and ended the week with minor gains. Currently, the exchange rate is relatively stable at around 1.0846, with a slight increase of 0.06%. Meanwhile, the US Dollar to Canadian Dollar exchange rate (USD to CAD) is showing a preference for buyers at the moment, with technical indicators pointing towards this trend. The price has increased by 0.03% for the day, although the upward momentum is slowing down.

The European Central Bank

Overall, investors are eagerly awaiting the decisions of both the Bank of Canada and the European Central Bank regarding their interest rates. These decisions will be guided by recent inflation data, and the ECB is particularly emphasizing the need for further evidence of price increases. The exchange rates between the Euro and the USD and between the US Dollar and the Canadian Dollar have shown some modest movements, with a rebound in the former and a preference for buyers in the latter.