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The main data event Wednesday in Europe is the UK inflation figures at 0700BST. In the North Americas, the Canadian inflation data at 1330BST will be closely watched. Additionally, markets will focus on the the BOC's interest rate decision at 1500BST.
UK inflation forecast to edge higher
Annual inflation is forecast to tick up to 0.8% in March after decreasing to 0.4% in February. This would mark the highest level since July, but the 20th consecutive reading below the BOE's target. February's decline was led by a drop in prices for clothing and second-hand cars. Core inflation eased as well in February to 0.9%, its lowest level since August 2020 and markets expect the index to rise to 1.1% in March.
Inflation is likely to increase further over the coming months, due to energy price base effects. Moreover, a change in seasonal patterns in 2020 is likely to result in fluctuations this year. The BRC shop price index saw another decline of retail prices in March as the lockdown forced many retailers to continue discounting. On the other hand, the services and manufacturing PMIs suggest higher output charges, driven by a sharp increase of input prices.
Source: Office for National Statistics
Canadian inflation seen rising
Annual Canadian inflation is expected to increase markedly to 2.3% in March, up from 1.1% recorded in February. Higher prices for gasoline were the main driver for February's acceleration of the CPI and they are likely to remain the main upward contribution over the coming months due to energy price base effects. Monthly consumer prices rose 0.1% in February and markets expect the index to edged up by 0.6% in March. Canada's manufacturing PMI indicates rising input prices and firms passing on the increased expenses to consumers.
BOC forecast to remain on hold
The Bank of Canada sees as odds on to maintain benchmark rates at 0.25% and keep the level of asset purchases unchanged at CAD4 billion a week. Although there are some expectations the BOC could start to taper from the middle of 2021, there are no expectations of a rate cut this year. BOC Governor Tiff Macklem will discuss the released monetary policy report at 1600BST, with the latest outlook for the economy and policy laid out.
The main events to look out for on Wednesday include speeches by BOE's Dave Ramsden and Andrew Bailey, followed by the BOC's press conference after the interest rate decision.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.