Week Ahead in FX (July 10 – 14): U.S. Inflation, U.K.’s Jobs Data, and BOC and RBNZ’s Decisions on Tap
We have a review of high-profile economic releases that could re-price interest rate expectations this week!
Aside from the monetary policy announcements of the Central Bank of China and the Reserve Bank of New Zealand, we will also see the latest job numbers in the UK, as well as the official Uncle Sam inflation.
Before all of that, I wrote ICYMI A quick recap of market topics Pay currency pairs last week. check it!
Now for the closely watched economic indicators on the calendar this week:
UK job data
on July 11th at 6:00 a.m. GMT, We will see one of the two high-profile economic releases that could influence the Bank of England (BOE) monetary policy decision on August 1st.
Markets see a net addition of 20.5K jobless claims in May, while the unemployment rate is expected to remain at 3.8% for the month.
However, all eyes will be on wage growth. Average earnings (excluding bonus) are expected to fall to 7.0% in the three months to year in May after seeing a post-pandemic record high of 7.2% in April.
A slowdown in wage growth should support claims that wage growth has passed its peak and encourage speculation of a softer BoE policy path.
RBNZ policy decision
on July 12th at 2:00 a.m. BSTThe Reserve Bank of New Zealand (RBNZ) is expected to take a leaf from the RBA book and halt the rate hike cycle, this time keeping interest rates at 5.50% in July.
As mentioned in RBNZ Decision Event GuideThe days when a pause in interest rate hikes is expected may limit the reaction of the New Zealand dollar to the actual event.
This does not mean that the New Zealand dollar will not see volatility though! The reaction of the New Zealand dollar may depend on the optimism of central bankers as well as the general risk-off sentiment ahead of the RBNZ event.
US Consumer Price Index and Producer Price Index reports
Just over a week ago, a lower reading of the US core PCE price index – the Fed’s preferred inflation measure – inspired risk and dollar selling in the markets.
And then, we found from last week’s FOMC meeting minutes that members mostly favor rate hikes at least twice this year. In fact, CME FedWatch is currently pricing in a whopping 92.4% odds of a 25 basis point Fed rate hike in July.
We’ll see if the official US CPI reports support the Fed’s continued tightening. on July 12 at 12:30 PM GMTTraders expect headline inflation to slow from 0.4% m/m to 0.3% m/m in June while the annual rate may decline from 4.0% to 3.2%. Even the core annual inflation rate is slowing from 5.3% to 5.0%!
Product prices are out July 13, 12:30 PM GMT It can also pile on Fed “peak rate” guesses. The annualized PPI could slow from 1.1% to 0.4% while the annualized core PPI could decline from 2.8% to 2.6%.
BOC policy decision
Wednesday will be a busy day for forex because, apart from the RBNZ decision and the US CPI release, we will also see the latest Bank of Canada (BOC) monetary policy decision at 2:00 PM GMT.
In contrast to the RBA and the RBNZ, markets see the Canadian central bank raising interest rates by another 25 basis points to a 22-year high of 5.00%. If you recall, the Bank of Canada paused rate hikes at the March and April meetings before implementing another rate hike in June.
Of course, the Canadian dollar’s reaction to a potential rate hike may depend on BoC members’ hawkishness and outlook for the Canadian labor market.
