Investors await US data and UK budget, BoC meeting in focus
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Investors await US data and UK budget, BoC meeting in focus

On Wednesday, a calm trading session saw the dollar edge lower as investors await central banks meetings and important data releases.

In the early Asian session, China's tech shares plunged the most in seven weeks following new regulatory worries. While short-term Treasury yields spiked as investors bet on inflation pushing interest rates higher.

Data from Australia showed that consumer prices rose at a six-year high last quarter, further evidence of worldwide pressure on prices.

As surprising strong inflation data raised the prospect of early interest rate hikes, the Australian dollar appreciated during the Asian session, with the Aussie hitting a fresh high against the euro, pushing EURAUD to seven-month lows.

As a result of better than expected consumer confidence in the United States, the dollar index rose modestly but remained below 94.

The dollar is likely to be holding steady during a flurry of central banks meetings, and economic data comes out, which may alter views on interest rates, inflation, and growth rates.

The Bank of Canada meets on Wednesday, and the European Central Bank will meet on Thursday when the Bank of Japan concludes its two-day meeting. Next week will be a busy week with the Federal Reserve, Bank of England, Reserve Bank of Australia, and Norway's Norges Bank meetings.

Investors expect the Bank of Canada to revise up its inflation forecast and become the first central bank among the G7 group, largely winding down its pandemic-era bond-buying program. The market expects a cut of C$1 billion in its bond purchase while fully pricing in a rate hike by April next year.

The USDCAD has been steady ahead of the Bank of Canada meeting, hovering in an ascending channel. It seems the market has already priced in positive results, and some corrections may occur in the near future.

Events of the day

Wednesday brings the release of the September durable goods orders, but the 3Q GDP release on Thursday and the September core PCE deflator on Friday will be of most interest.

Also being watched by investors is the half-yearly update from the UK's finance minister, who is expected to set out tighter budget plans and unveil a plan to make Britain the first big economy to withdraw both fiscal and monetary stimulus. These developments due to data release can shake sterling, while the GBPUSD has already broken below the firm support level of 1.37345, paving a window toward 1.37000 and 1.36400.