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European Central Bank, Bank of Canada and Bank of Japan Policy meeting in focus: Hawkish or Dovish?

Simon Alagbe

Analyst

Central bankers have been very hawkish in their recent meetings and speeches as inflation continues to soar. 

The Bank of Canada will kick off the series of central bank meetings scheduled for this week with the increased expectation that the Tiff Macklem-led bank will continue its aggressive rate campaign after inflation data came in higher than expected. The latest print of CPI from Canada showed a 6.9% year-on-year increase against the 6.7% predicted by economists. 

A 50 basis point hike is widely expected by market participants and this could spur the Loonie to surge against other major currencies albeit for a moment before Macklem and his deputy address the press. 


Christine Lagarde-led European Central Bank is hugely expected to follow the pace set by the BOC when the bank makes official the Main Refinancing Rate. The previously dovish bank is almost certain to deliver on another rate hike after the focus of the ban shifts to a more tightening measure. The bank is also poised to speed up the massive balance sheet as inflation remains over the roof at 10% year-on-year. 

It seems Lagarde and her team will have no option but to hike the rate and signal that more hikes are still in the pipeline. 


The Bank of Japan seems to be the only exception amongst Central Banks scheduled to release interest rates and policy stance this week as the bank is widely expected to keep rates constant. The yen has been sinking, and it looks as if BOJ is not ready to make a life jacket available to the safe haven currency. The CPI readings from Japan hit an 8-year high at the latest release as the country grapples with increased raw material prices and a deep depreciation in the yen. The price of raw materials has been skyrocketing in the face of the current facade between Russia and Ukraine and has been a major driver of inflation across the globe. The speech by the outgoing Governor, Haruhiko Kuroda may be the major driver of the yen on the day as the decision not to hike the rate is already priced in. 


These policy meetings usually result in increased volatility and I advise traders to trade cautiously. 

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