There is no doubt that the Bank of Canada will keep its key interest rate unchanged at one per cent, reflecting a general global economic slowdown.
But traders will be looking to the central bank's commentary for an idea of where it thinks the Canadian economy is headed and hints about when it might get around to raising rates.
"If the bank aggressively cuts its economic forecast and abandons its mild tightening bias, the currency could be dinged a bit," said Doug Porter, deputy chief economist at BMO Capital markets.
Porter said there is a strong case for the Bank of Canada to move back towards a more neutral bias as far as rates are concerned.
He notes that almost every major central bank in the world "has eased in some way over the last month whether it's quantitative easing by the Bank of England or actually outright cuts by the European Central Bank and all kinds of emerging markets, like China and Korea."
The bank had indicated earlier this year that it might move to raise rates, but worsening economic conditions have dampened any expectations for a hike any time soon.
"We have again had to shift our view on the bank," said Porter.
"Back in April, we had brought forward when we had them starting to hike rates and subsequently we have put them right back to where they were. So we don't see the next rate hike by the Bank of Canada until about a year from now."
The Canadian dollar hasn't closed above parity with the U.S. dollar since early May and since then the commodity-sensitive loonie has generally found a perch around 97 or 98 cents. That is a level of strength Porter found surprising considering that oil prices have tumbled almost 20 per cent since the beginning of May while copper prices have fallen by about 12 per cent.
"I do believe it is trading well above the so-called fair value based on where commodity prices are now," said Porter.
"The currency should be lower."
Meanwhile, stock markets will be focused on an increasing number of second-quarter earnings reports from corporate America.
Citigroup kicks off and General Electric wraps up the week and there are plenty of major reports in between.
But expectations are muted for the quarter as the global economic recovery faltered. Big multinationals also faced headwinds from a U.S. dollar that increased in value as a worsening eurozone debt crisis pushed nervous investors to the safe haven status of American treasuries.
"We became so accustomed last year to earnings always surprising on the upside and now I think we're getting to earnings surprising on the downside phase," said Norman Raschkowan, North American strategist at Mackenzie Financial Corp.
"And chances are that is not going to be a one-quarter phenomenon, the second-quarter numbers will probably be soft and the third-quarter numbers will be soft."
Raschkowan said this doesn't mean the overall environment is bad.
"It just means that we really are looking at single digit earnings growth for the market for this year, he said, which in a world where the global economy is growing like three per cent, that's not bad. It's just not what people were hoping for."
The TSX ended last week down 145 points or 1.24 per cent.
On the economic calendar, traders will take in the latest Canadian inflation data.
Statistics Canada is expected to report that the consumer price index rose by 0.2 per cent in June from May. The annual rate of inflation is expected to rise to 1.7 per cent from 1.2 per cent in May. The gain would reflect a big drop in prices a year ago, driven by a huge decline in auto prices last June.
In the U.S., data out Monday is expected to show retail sales rose by 0.2 per cent in June after dropping by the same amount in May, thanks to stronger auto sales.
And investors will get an updated snapshot of the economy when the U.S. Federal Reserve releases its so-called Beige Book report on regional conditions on Wednesday.