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Weekly Outlook Market News

Weekly Outlook: RBNZ and BoC to remain Hawkish, Powell may dominate the USD

Despite the calm opening, this week’s calendar is loaded with many data releases and policy decisions from central banks in Canada, New Zealand and Japan. Here’s a snap of what is scheduled for the week: 

  • US CPI Data 
  • RBNZ Meeting 
  • British CPI Numbers
  • BoC Rate Decision 
  • Fed Chair Powell Testifies
  • Australian Employment Data 
  • Chinese GDP Data 
  • CPI Data in New Zealand 
  • BoJ Rate Decision
  • US Retail Sales 

USD

The US earnings season kicks off during the week as several large US banks and companies will report their results for Q2. Investors will also keep an eye on Fed Chair Powell semi-annual report testification to Congress. June’s CPI inflation rate will probably remain close to May’s near 13-year high. The annual rate is expected to moderate to 4.9% from May’s 13-year high of 5.0%. Retail sales figures are seen pointing to another month of weak domestic trade. Retail sales dipped 1.3% m/m in May as the boosts from the stimulus payments and reopening of the economy began to wane. Stronger data could raise hopes of earlier tapering, potentially giving the dollar another positive push.

CAD

The Bank of Canada is expected to leave monetary policy unchanged when it meets this Wednesday. However, a further reduction in QE may be expected at this meeting. Market consensus points to reducing weekly bond purchases from C$3 billion to C$2 billion as a potential outcome. The Bank will publish its updated economic projections and expectation for a possible rate hike for the second half of 2022.

NZD

The Reserve Bank is expected to start policy tightening in November this year compared to earlier projections of August 2022. The surprising shift in rate expectation came after business confidence across the country jumped to the highest level in four years, reflecting a faster rebound from the pandemic downturn. As there are no policy changes expected from the upcoming meeting, investors will focus on the statement’s language and how the committee perceives the latest updates that may be translated to a sooner rate hike. That language will undoubtedly have to change. While sustained inflation and maximum sustainable employment haven’t been reached yet, it’s clear that they are no longer away.  

JPY

The Bank of Japan is expected to keep its policy interest rate at -0.1% during its July meeting. The quarterly outlook report scheduled alongside the policy decision is expected to show lower growth projections for the current fiscal year.  The BoJ is nowhere near policy normalization, and it’s left little doubt that the bank will be engaged in QE long after other central banks have exited theirs. Key economic data include machinery orders, producer prices and the final estimates of industrial production.


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