The Bank of Canada (BoC) is poised to take center stage this Wednesday with expectations of a rate cut, marking the sixth consecutive meeting where the policy rate is anticipated to be lowered. Analysts widely predict a 25-basis-point reduction, which would bring the benchmark rate down to 3.00%. Meanwhile, the Eurozone and Australia are also in focus as new economic data emerges, impacting financial markets worldwide.
In December, loans to non-financial companies in the Eurozone showed an accelerated growth of 1.5% year-on-year, while adjusted loans to the private sector rose by 2%, indicating a rebound in borrowing activity. However, Eurozone money growth, as measured by M3, decelerated to a 3.5% increase year-on-year, down from November's 3.8% rise. Despite this slowdown, M1, the most liquid part of the money supply, increased by 1.8% on a yearly basis. Additionally, adjusted loans to households experienced a moderate uptick, climbing 1.1% year-on-year from November's 0.9%.
Banks across the Eurozone have tightened credit standards for non-financial companies during the fourth quarter of last year. This trend is expected to continue across most economic sectors into the first half of 2025, with services being the exception. The yield curve is steepening, possibly causing savers to shift their investments towards longer maturities not accounted for in M3.
The European Central Bank (ECB) is expected to maintain its gradual easing path, with a rate cut justified as "diminishing the degree of restrictiveness." This approach aims to support economic recovery while managing inflation expectations.
In currency markets, the EUR/USD pair has lost momentum, retreating toward 1.0400 in Wednesday's European session. Similarly, the GBP/USD pair has reversed its early gains and is now trending south toward 1.2400.
Across the globe, Australia is set to release its latest inflation-related data on Wednesday. Financial markets are anticipating further easing of price pressures by the end of 2024. In response, the Reserve Bank of Australia (RBA) is expected to announce an interest rate cut during its February meeting, aligning with global trends of monetary easing.
These developments underscore the complex interplay of global economic factors as central banks navigate through tightening and easing policies. The anticipated rate cuts aim to stimulate growth while managing inflationary pressures amid varied economic signals.