Forex playas pay attention because Uncle Sam is printing its inflation figures while the RBNZ and BOC are likely publishing new (read: higher) interest rates this week.
Planning on trading top-tier economic releases?
Here are the potential market movers this week:
Major Economic Events:
RBNZ’s policy statement (Jul 13, 2:00 am GMT) – Back in May the Reserve Bank of New Zealand (RBNZ) raised its interest rates for a fifth consecutive time to 1.50% to 2.00%. That’s also the second time RBNZ raised rates by 50bps!
This time markets see the central bank raising its rates by another 50bps to 2.50% though some analysts believe that RBNZ will step up its game and hike its rates by 75bps.
RBNZ won’t be printing revised economic projections and holding pressers after the decision, so markets will likely pay closer attention to the statement.
New Zealand’s house prices, business confidence, and GDP aren’t positioned to handle uber-high interest rates for long, so watch out for softening in RBNZ’s hawkish tones!
U.S. CPI reports (Jul 13, 12:30 pm GMT) – NFP who? Friday’s non-farm payrolls (NFP) data supported the Fed’s aggressive tightening schedule, so you can bet that markets will look at Uncle Sam’s inflation numbers for confirmation.
Analysts expect annualized consumer prices to speed up from 8.6% to 8.8% in June, which would mark the highest reading since December 1981. The headline monthly inflation is expected to pick up from 1.0% to 1.1% while core inflation could slow down a bit from 0.6% to 0.5%.
Other scheduled reports can help paint a picture of consumer spending. PPI numbers (Jul 14, 12:30 pm GMT) are seen speeding up from May to June while annual retail sales (Jul 15, 12:30 pm GMT) could materially slow down even as the monthly numbers show improvement.
Meanwhile, the UMich consumer expectations (Jul 15, 2:00 pm GMT) – which inspired hawkish expectations recently – is expected to print further declines in July.
Traders already see the Fed raising its rates by another 75bps (up from its initial 50bps rate hike plans). This week’s consumer numbers will solidify the markets’ expectations or encourage even more hawkish expectations.
BOC’s policy statement (Jul 13, 2:00 pm GMT) – Like the RBNZ, the Bank of Canada (BOC) is expected to step up its tightening game and raise its interest rates by 75bps to 2.25% this week.
And why not? Canada’s GDP growth, labor market levels, and inflation that’s rising at its fastest pace since January 1983 should give BOC confidence to raise its rates by a bit more than its current pace.
Watch BOC’s statement and presser closely to see if the central bank is planning to keep its aggressive tightening pace or if it plans to slow down its rate hikes in its next meetings.
Forex Setup of the Week: NZD/USD
NZD/USD 1-hour Forex Chart
NZD/USD has been trading below a descending trend line since late June and is generally keeping below the 100 and 200 SMAs since the 100 SMA crossed below the 200 SMA on the 1-hour time frame.
Will the tides change for NZD/USD this week?
The pair is registering higher lows and higher highs since last week and it looks like NZD bulls are game to test its trend line and SMA resistance levels again.
This week’s RBNZ decision and U.S. inflation reports could make or break NZD/USD’s short-term downtrend.
Signs of RBNZ toning down its hawkish stance could highlight the Fed’s commitment to raise its interest rates and drag NZD to new monthly lows.
If this week’s reports encourage risk-taking, however, or if RBNZ raises its rates by 75bps and hints at further rate increases, then NZD/USD could trade above the 1-hour trend line.
Note that NZD/USD’s daily chart is also showing a bullish divergence, so it probably won’t take much for NZD bulls to jump in at the first signs of NZD-bullish news updates.
Keep close on this one, forex friends!
