Reserve Bank of Australia Rate Decision (23:30 GMT, 19:30 EST)
Consensus:      6.0%
Previous:          6.0%

Outlook:  Markets expect the Reserve Bank of Australia to leave rates unchanged at 6.0% after hiking 25 basis points at its August meeting. A quick look at synthetic forward interest rates will show, however, that this consensus is far from certain that a change will not occur at tonightââ,¬â"¢s meeting. Indeed, futures traders have priced in an almost 50% probability that RBA Governor Macfarlane will move the overnight cash rate to 6.25%. As such, we can expect a good deal of volatility surrounding the event given the lack of a clear-cut expectation. Recent inflation reports suggest that the bank will almost definitely raise rates in the medium term, but many doubt that they will do so immediately after their most recent hike. Indeed, previous trends suggest that the bank will wait before its next rate hike. After raising rates by 25bp in May, the central bank waited three months to take them another 25bp higher to 6.0%. Given this, we feel that it is likely they will stay on the sidelines until their October meeting at the earliest.

Previous: The Reserve Bank of Australia raised rates by a quarter of a percentage point in August, as cited inflationary pressures threatened to undermine price stability. Indeed, RBA Governor Ian Macfarlane had telegraphed the move well ahead of time in repeatedly pointing out that inflation remained above the bankââ,¬â"¢s 2-3 percent comfort level. Indeed, the consumer price index showed a robust 4.0% gain in the second quarter, and more recent TD Securities inflation estimates show that July produced an annualized inflation rate of 3.5%. The more relevant question now remains whether the bank will raise rates in the short term. Given that StatsNZ only produces official inflation numbers once per quarter despite the fact that the RBA meets monthly, we feel that Governor Macfarlane may wait until there is more economic data before raising rates again. 

Bank of Canada Interest Rate Announcement (13:00 GMT, 09:00 EST)
                               (QoQ)          (YoY)
Consensus:              0.9%           2.8%
Previous:                  0.9%           3.1%

Outlook:  Economists widely expect the Bank of Canada to leave rates unchanged in tomorrowââ,¬â"¢s official announcement. In fact, 30 of 30 analysts have told Bloomberg they expect rates to stay unchanged at 4.25%. With recent monthly CPI numbers printing -0.2% and 0.1% changes in June and July, respectively, inflation seems to be well-contained. Indeed, along with predicting no change in tomorrowââ,¬â"¢s meeting, some analysts expect the possibility of a rate cut by the first quarter of 2007. While not overtly dovish, Bank of Canada officials have highlighted the fact that inflation remains contained while forecasts of future economic growth may come down as the US economy slows. As such, tomorrowââ,¬â"¢s rate announcement should effectively be a non-event. It will be worthwhile to listen to the comments following the release, however, as some fear that overly soft comments will signal rate cuts sooner than currently expected.

Previous: The Bank of Canada announced that it would leave rates unchanged in the month of July, as low inflation and moderating economic growth provided little reason to deviate from previous policy. Indeed, with the GDP growth rate on a steadily declining slope since its peak in November 2005, BoC officials have expressed some concern over the future of the Canadian economy. While this is not enough to put a dovish bias on expectations for the coming meetings, analysts broadly expect rates to remain unchanged in the medium term. In fact, long term outlooks cite the possibility of more accommodative monetary policy in 2007. More importantly, with headline consumer inflation at 2.3 percent annualized in July, there is little impetus for any monetary policy changes in the coming months. We shall listen to BoC Governor David Dodgeââ,¬â"¢s upcoming commentary to gauge any chance in bias by the Canadian central bank.

Richard Lee is a Currency Strategist at FXCM.