This week we saw a lot of uncertainty in the markets, largely due to the rapidly increasing number of new COVID-19 infections in Asia. All this affects not only Asian indices, but also Antipode currencies, i.e. AUD and NZD. Next week the RBNZ and the BoC will present their interest rates decisions and theoretically may signal a moderate normalization of monetary policy in the near future. It is also worth paying attention to GDP figures from China and CPI and retail sales data from the US. Be sure to watch NZDUSD, US500 and USDCAD next week!
The Reserve Bank of New Zealand is set to review its monetary policy settings on Wednesday. No major policy changes are expected, however investors will look for more hints on monetary tightening in the coming months. Intensifying inflation pressures are the main driver underpinning expectations of November interest rate increase amid labour shortages and supply chain disruptions. NZD traders should also pay attention to the Q2 GDP readings from China which will be released on Thursday as both economies are closely related to each other.
The S&P 500 reached a fresh all-time high on Wednesday following publication of FOMC minutes, however fears of slowing growth and worries that new Covid-19 variants could stall the global economic recovery led to declines on Thursday. Investors await Q2 earnings season to kick off next week for an update on the private sector recovery. Markets may also react to the key macro data. US CPI figures for June will be released on Tuesday and may indicate whether inflation in the United States is actually only of a temporary nature. It is already expected that CPI inflation for June will slow down to 4.7% YoY from 5.0% YoY in May. If, on top of that, the Fed shifts its rhetoric a bit back to ultra-dovish, we could see further gains on Wall Street. PPI figures on Wednesday, jobless claims on Thursday and retail sales data on Friday round up the calendar.
Next week central bank meetings besides New Zealand will also be held in several other countries including Japan and South Korea. However, the BoC meeting, which will take place on Wednesday, arouses the greatest interest among investors. Markets expect that the BoC will taper QE asset purchases further this month encouraged by robust growth prospects. Purchases are expected to fall to C$2 billion per week by month-end, down from the current C$3 billion.