American FX Outlook: The Bank Of Canada Is Set To Keep Rates On Hold As Fed Officials Speak

What you need to know before markets open

• The UK House of Lords will vote on the "Withdrawal Bill" today with a risk of insisting on staying the customs union.  The bill was delayed in the House of Commons when it appeared that the government's intention to withdraw from the customs union faced a likely defeat.
• The UK CPI rose 2.5 percent over the year in March, coming out below the market forecast with Sterling being hammered lower in the knee-jerk reaction to data. For details read my brief analysis here.
• The Eurozone headline inflation also decelerated in March to 1.3 percent y/y, with core inflation stuck at 1.0 percent y/y growth rate for the third months in a row.
• The Bank of Canada is set to keep the rates unchanged at 1.25 percent in April with the press conference following the monetary policy decision providing the reasoning behind the decision.

Wednesday’s market moving events

• New York Federal Reserve Bank President William Dudley is scheduled to give opening remarks at the "Navigating Future Risks for Community Banks" event at the Community Bankers Conference in New York at 12:30 GMT.
• The Bank of Canada is expected to hold interest rates steady at 1.25 percent in March
• The New York Federal Reserve Bank President William Dudley is scheduled to speak about the economic outlook and monetary policy at the City University of New York's Lehman College at 19:15 GMT.
• The Federal Reserve Vice Chairman for Supervision Governor Randal Quarles is due to speak on "Navigating New Opportunities: Transatlantic Regulatory Reform" at the Bretton Woods Committee 2018 Annual Meeting in Washington at 20:15 GMT.

Major market movers

• Sterling is a loser of the day falling some 0.7 percent to 1.4190 level against the US Dollar after the UK CPI missed the forecast and decelerated to 2.5 percent y/y in March. I still think inflation does not alter the scenario of the Bank of England hiking the Bank rate on May 10, 2018. For details read my analysis here.
• The EUR/USD also fell after the Eurozone inflation data but recovered soon after to trade flat.
• Watch USD/CAD for reaction to the Bank of Canada monetary policy decision and the report presented at the press conference.

Earlier in Asia/Europe

• Eurogroup, the group of the Eurozone member states finance ministers, is meeting in Brussels.
• The UK inflation decelerated to 2.5 percent y/y in March while core inflation rose 2.3 percent y/y, both readings coming out below market expectations.
• The Eurozone inflation also decelerated to 1.3 percent percent y/y in March while core inflation remained at 1.0 percent y/y.