Monetary policy will be in the headlines on Wednesday as the Bank of Canada (BOC) gets set to vote on interest rates. The BOC is expected to continue raising interest rates thanks to a firming domestic economy.

Action begins at 10:00 GMT with a report on Eurozone consumer inflation. The consumer price index (CPI) is forecast to rise 0.4% in December, following a 0.1% increase the month before. In annualized terms, this translates into a gain of 1.1%, which is well below the European Central Bank’s target of 2%.

Shifting gears to North America, the Federal Reserve will issue the latest US industrial production figures for December. Factory orders are projected to rise 0.4% from November, double the rate of the previous month. The industrial capacity utilization rate is expected to go up to 77.3% from 77.1%.

Housing data will also be in the headlines on Wednesday. The National Association of Home Builders (NAHB) will issue its monthly housing market index at 15:00 GMT. The monthly reading is expected to drop to a still-solid 72.

The BOC rate decision and monetary policy report will be unveiled at 15:00 GMT. Policymakers will issue a press conference at 16:15 GMT. Canada’s path of rate normalization has been much more aggressive than virtually all of its advanced industrialized peers, including the Federal Reserve. However, uncertainty over the future of NAFTA could derail the central bank’s outlook. NAFTA refers to the North American Free Trade Agreement, which has governed bilateral trade between Canada, the United States and Mexico since 1994.

Elsewhere on the policy front, Federal Reserve officials Charles Evans, Robert Kaplan and James Mester will deliver speeches on Wednesday. The Federal Open Market Committee (FOMC) will hold its next policy meeting in a few weeks. No change in policy is expected at that time.

EUR/USD

The EUR/USD has consolidated in a narrow range over the past two days after surging to multiyear highs at the end of last week. The pair was last seen trading at 1.2270, where it was up 0.1%. Over the short-term, the pair faces immediate resistance at the psychological 1.2300 region.

GBP/USD

Cable continues to trade around 1.3800, as investors await fresh trading catalysts in the form of economic data. The pair is likely to run into stiff resistance near 1.3850. On the opposite side of the spectrum, immediate support is located around 1.3700.

USD/CAD

The Canadian dollar has been on an upward trajectory for the past four weeks, sending the USD/CAD to its lowest level since September. The USD/CAD was last seen trading at 1.2441, where it was up 0.1% from the previous close. The pair remains on a downward path, a trend that is expected to continue as the BOC raises interest rates.