"A lot of volatility, I think, this week," said Andrew Pyle, senior wealth adviser and portfolio manager at ScotiaMcLeod in Peterborough, Ont.
"Flip a coin — do I watch what the Scots are doing or do I try to figure out what the Fed is doing?"
Markets have generally come around to the view that the Fed will up rates sometime next year, likely in mid-2015. Rates have been near zero since the financial collapse of 2008.
But the economy has improved to a point where it is thought the U.S. central bank can finally act and now traders are wondering if the Fed could move even earlier.
Specifically, they will be looking at the statement released by the Fed at the end of its planned one-day meeting on Wednesday to see if there has been a change in key language.
For some time, the Fed has reassured markets that "it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends."
That quantitative easing program is widely expected to end at the end of October when the Fed finally ends its monthly bond purchases.
Pyle said at some point the Fed will adopt a more hawkish tone on interest rates and remove that language.
"However, it's not clear that that meeting is next week's meeting," he said.
Meanwhile, after largely ignoring the Scottish independence referendum campaign, markets were jolted to attention last week in the wake of a poll that showed the race is now too close to call.
And that has created much uncertainty about how trading desks will react the morning after.
"No one seems to know what's going to happen here. Do they take their own currency?" asked Pyle.
"I don't think it's going to be earth shattering. Essentially, global capital markets — do they really care a bunch of Scots want to leave the union versus what is going on in Ukraine and whether the Fed hints at a rate hike in January? Those are the bigger issues right now."
Uncertainty about the Fed and the referendum made for tepid stock markets last week, where the TSX shed 0.24 per cent per cent while the Dow industrials lost 0.87 per cent.
But the Canadian dollar had a dreadful week, losing 1.76 U.S. cents to a five-month low of 90.14 cents US as the greenback appreciated on Fed rate speculation and uncertainty about the future of the U.K.
At the same time, lower oil prices are also having an impact on the commodity-sensitive loonie.
"One thing that has happened is that oil prices have slipped from over $100 pretty consistently through the summer. We're at the low 90s now and that's an under-appreciated fact for Canada that we have become more and more a bit of a one trick pony on energy," said Mark Chandler, head of Canadian FIC strategy at RBC Dominion Securities.
On the economic front, markets will look to the August reading on Canadian inflation.
Statistics Canada is expected to report Friday that the index was flat last month following a 0.2 per cent dip in July, leaving the annualized rate at 2.1 per cent.
Manufacturing shipments data for July will be released on Tuesday. CIBC said in a commentary that it expects shipments to rise by a solid 1.4 per cent, boosted by a strong auto sector.
In the U.S., investors will consider CPI data for August on Wednesday.
A flat CPI showing is also expected in the U.S. following a 0.1 per cent increase in July. This would leave the American inflation rate at an annualized rate of 1.9 per cent.
The August reading on housing starts will be released on Thursday and CIBC said it is looking for starts to ease to an annualized pace of 1.045 million following a strong gain in July.