“We think the European Central Bank (ECB) will announce a lengthening of its asset purchase programme for at least six months, in tandem with the publication of its new economic projections, at its policy meeting next Thursday (8 September). Such an announcement is likely to be supportive of a grind lower in the EUR broadly and, if combined with the market increasing pricing for a September Fed hike, consistent with EURUSD falling towards our end-Q3 target of 1.07.
We are not expecting any surprise easing announcements from the Reserve Bank of Australia (6 September) or the Bank of Canada (7 September).
We think the AUD and CAD will be driven lower by external factors, as the adjustment higher in Fed tightening expectations challenges the risk environment.
We continue to favour positioning for AUDUSD downside through options in our portfolio of recommendations, and target a move to 0.70 in the coming months. With WTI prices falling to USD 45/bbl in the past week, in line with our commodity strategy team’s forecasts, we also see the CAD at risk and continue to target a rise in USDCAD to 1.40 by the year end”.
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