We’ve got a parade of top-tier economic releases that could lead to the re-pricing of interest rate expectations this week!
Aside from BOC and RBNZ‘s monetary policy announcements, we’ll also see the U.K.’s latest jobs numbers, as well as Uncle Sam’s official inflation, reads.
Before all 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 economic indicators on the calendar this week:
U.K.’s jobs data
On July 11 at 6:00 am GMT, we’ll see one of two top-tier economic releases that may affect the Bank of England’s (BOE) monetary policy decision on August 1.
Markets see a net addition of 20.5K jobless claimants in May, while the unemployment rate is seen remaining at 3.8% for the month.
All eyes will be on wage growth, however. Average earnings (excluding bonus) is expected to cool down to 7.0% in the three months to the year in May after seeing a post-pandemic record high of 7.2% in April.
Slower wage growth would support claims that pay growth has passed its peak and encourage speculations of a less hawkish BOE policy path.
RBNZ’s policy decision
On July 12 at 2:00 am GMT, the Reserve Bank of New Zealand (RBNZ) is expected to take a leaf from the RBA’s book and pause its rate hike cycle, this time keeping its rates at 5.50% in July.As mentioned in the RBNZ Decision Event Guide, days of anticipating a rate hike pause could limit NZD’s reaction to the actual event.
That doesn’t mean that the New Zealand dollar won’t see volatility though! NZD’s reaction may depend on the central bankers’ hawkishness as well as the overall risk sentiment vibe ahead of the RBNZ’s event.
U.S. CPI and PPI reports
A bit over a week ago, a lower reading for the U.S. core PCE price index – the Fed’s preferred inflation gauge – inspired risk-taking and dollar selling in the markets.
And then, we found from last week’s FOMC meeting minutes that members mostly favor at least two more rate hikes this year. In fact, the CME FedWatch tool is currently pricing in a whopping 92.4% odds of a 25bps Fed rate hike in July.We’ll see if the official U.S. CPI reports support the Fed’s continued hawkishness. On July 12 at 12:30 pm GMT, traders expect the headline inflation to slow down from 0.4% m/m to 0.3% m/m in June while the annualized rate could dip from 4.0% to 3.2%. Even the core annual inflation rate is seen slowing down from 5.3% to 5.0%!
Producer prices out on July 13 at 12:30 pm GMT could also pile on to Fed “peak rate” speculations. Annualized PPI could slow down from 1.1% to 0.4% while annual core PPI could slip from 2.8% to 2.6%.
BOC’s policy decision
Wednesday will be a busy day for forex playas because, aside from the RBNZ decision and U.S. CPI release, we’ll also see the Bank of Canada (BOC)’s latest monetary policy decision at 2:00 pm GMT.
Unlike the RBA and RBNZ, markets see the BOC raising its interest rates by another 25 basis points to a 22-year high of 5.00%. If you recall, the BOC had paused its rate hikes in the March and April meetings before implementing another rate hike in June.
Of course, CAD’s reaction to the potential rate hike may depend on the BOC members’ hawkishness and expectations for Canada’s labor market.