ECONOMIC DATA, MONETARY POLICY TAKES CENTRE STAGE ON WEDNESDAY
Investors can expect an active session on Wednesday headlined by central bank speeches and high-profile economic data.
In terms of economic data, a pair of consumer confidence reports from France and Italy will be released in the early European session. Both indicators are expected to show no change for September.
The Centre for European Economic Research (ZEW) will report on Switzerland business expectations for the month of September. The monthly report provides a barometer of business health for one of Europe’s most important economies.
Italian industrial production data will be released at 09:00 GMT. The report is used to gauge the state of manufacturing in the Eurozone’s third-largest economy.
The biggest data release of the day takes place on the North American circuit. At 8:30 GMT, the US Department of Commerce will issue the latest report on durable goods orders.
Orders for goods meant to last three years or more likely rose 1% in August, according to a median estimate of economists. Durable goods orders plunged 6.8% in June, offsetting large gains the month before.
Excluding transportation equipment, durable goods orders likely rose 0.2%.
The National Association of Realtors’ pending home sales index will also be released at 14:00 GMT. Pending home sales likely fell 0.5% in August, analysts say.
Shifting gears to monetary policy, Bank of Canada (BOC) Governor Stephen Poloz will make the news rounds at 15:45. Poloz heads the only major central bank not named the Federal Reserve to raise interest rates. Investors widely expect the BOC to hike rates for a third time before year’s end.
South of the border, Federal Reserve Bank of St. Louis President James Bullard will deliver a speech at 17:30 GMT. A half hour later, Federal Open Market Committee (FOMC) member Lael Brainard will deliver remarks.
The euro’s correction continued for a second consecutive day on Tuesday, with the EUR/USD falling below 1.1800 for the first time in over a month. The pair was little changed leading into the European session. From a technical perspective, the pair is looking at a possible bearish correction now that price action has fallen below 1.1830. Investors should, therefore, be on the lookout for a broader correction in the short term.
In a sign of exhaustion, the British pound drifted lower on Tuesday to reach an intraday low of 1.3409 US. Cable would later recover to close near the 1.3460 region. Prices were down again in Asian trade. Investors should keep an eye on the 1.3449 level, which corresponds to the 23.6% Fibonacci retracement of the recent bullish uptrend. A break below that level could expose the pair to significant losses over the short term.
The USD/CAD has consolidated off multiyear lows, with prices currently trading in the mid-1.23 region. However, the short-term picture remains bearish as the BOC eyes further rate adjustments. Oil prices are also trading at multiyear highs (in the case of Brent), which is a strongly bullish sign for the loonie.