It’s gonna be another busy trading week, with a bunch of top-tier events lined up!
This time, the focus is on retail sales data, FOMC minutes, and the RBNZ decision.
But before that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!
And now for the closely-watched potential market movers this week:
Major Economic Events:
Retail sales reports – With market watchers still wary of the R-word these days, consumer spending data could have more insights on whether or not inflation and higher borrowing costs are weighing on economic activity.
First up, we’ve got China’s retail sales numbers (Aug. 15, 2:00 am GMT) that might show a jump from 3.1% to 5.0% year-over-year growth in July.
After several lockdowns in major provinces in the previous months, consumer spending likely surged when restrictions eased last month.
Uncle Sam will also be reporting retail sales data (Aug. 17, 12:30 pm GMT) mid-week, and analysts are projecting a slowdown in spending.
A meager 0.2% uptick is expected for the headline figure, following the earlier 1.0% gain, while the core reading could come in at 0.1%. Weaker than expected results could highlight the technical recession in the U.S. and keep investors worried that another economic contraction is in the cards.
On Friday, we have U.K. retail sales data (Aug, 19, 6:00 am GMT) and Canada’s consumer spending figures (12:30 pm GMT) lined up. The former might report an even sharper 0.2% decline in retail sales, underscoring the risk of stagflation, while the latter could also indicate weaker spending.
RBNZ monetary policy statement (Aug. 17, 2:00 am GMT) – Time for another interest rate hike from New Zealand!
The RBNZ is expected to lift their OCR from 2.50% to 3.00% in this upcoming meeting, as the economy has been able to maintain strong employment and growth while also dealing with rising inflation.
This would mark their fourth consecutive 0.50% increase in borrowing costs, following a set of 0.25% hikes since October last year. What market participants would like to know is whether or not the central bank can keep up this streak in the coming months, so do watch out for hawkish remarks!
U.K. CPI (Aug. 17, 6:00 am GMT) – Will the U.K. report double-digit inflation this time?
Another strong pickup in price pressures is eyed for July, with number crunchers estimating an increase from 9.4% to 9.9% in the headline CPI. Don’t forget that the BOE warned that inflation could reach as high as 13% this year, even as they scramble to keep price pressures in check.
FOMC meeting minutes (Aug. 17, 6:00 pm GMT) – With dollar traders pricing in lower odds of another 0.75% rate hike in the next Fed decision, the minutes of their earlier meeting could have more clues on what policymakers are planning.
Even Fed head Powell himself said that “it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation.”
If other FOMC members echo this view, keep an eye out for a continuation of the risk rallies in stocks and commodities. After all, higher-yielding assets have rebounded upon seeing slower U.S. inflation figures recently.
Australian employment data (Aug. 18, 1:30 am GMT) – The Land Down Under will be printing a fresh set of jobs figures later in the week, possibly reporting a subdued increase of 26.5K compared to the earlier 88.4K gain.
This could be enough to keep the unemployment rate steady at 3.5% for July, which might still be enough to support the Aussie if risk-on flows are in play.
Forex Setup of the Week: GBP/NZD
GBP/NZD Daily Forex Chart
The upcoming U.K. data and RBNZ decision might bring additional volatility for GBP/NZD!
The pair is already in selloff mode and has tumbled to the major support zone around 1.8700. Will we see profit-taking during the actual events?
Stochastic seems to be suggesting so, as the oscillator is already in the oversold region. After all, investors likely priced in their expectations for an RBNZ hike and another surge in U.K. inflation.
However, the 100 SMA is still below the 200 SMA to hint that there’s a chance support could break. If that happens, better be ready to for another sharp GBP/NZD decline!
On the other hand, if we do see some “buy the rumor, sell the news” action during the major market releases, I’ll watch out for opportunities to short on large pullbacks.
This post first appeared on babypips.com
