Currency News: BoE, RBNZ, and RBA Interest Rate Decisions Ahead
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BoE, RBNZ, and RBA Interest Rate Decisions Ahead

05 February 2018 by FC Exchange

Currency experts FC Exchange take a look at some of the events facing the market this week, from BoE, RBNZ, and RBA central bank announcements, to economic data.

GBP – How will the UK service sector hold up?

Last week

– Last week wasn’t optimistic in terms of UK economic data. Mortgage approvals slipped in December, coming in at 61.0K, Markit’s January manufacturing purchasing managers’ index (PMI) fell to 55.3 from 56.2 instead of climbing as forecast, and Markit’s construction PMI also declined to 50.2 from 52.2, residing barely above the 50.0 benchmark which separates expansion from contraction.

– Bank of England (BoE) Governor Mark Carney spoke giving a relatively hawkish tone suggesting that the central bank would be focusing on returning inflation to target and stated the bank has no bias on Brexit. Carney also called to end the retail price index (RPI) as a measure of inflation to dictate student loan interest and rail fare hikes, when the consumer price index (CPI) is the preferred method of reading inflation.

Week ahead

Markit’s services and composite PMI’s will see the pound start the week with some economic influence before Tuesday and Wednesday pass with only low-tier data published. However, Thursday could see things heat up for sterling with the Bank of England’s interest rate decision. It’s very unlikely the central bank will make a move on its interest levels, but any comments from BoE officials around the matter might create market movement. As always, Brexit will be in the background and could create some dramatic currency swings should any developments take place.

EUR – ECB Economic Bulletin ahead

Last week

– Eurozone growth slipped from 2.8% to 2.7% in the fourth quarter last year.

– German inflation contracted in January by -0.7%, pulling the annual figure down to 1.6% from 1.7%. Meanwhile, the nation’s unemployment rate improved to 5.4% from 5.5%.

– Eurozone inflation fell from 1.4% to 1.3% in January, showing the impact a stronger euro has had on the currency bloc.

– In Germany, the IG Metall union was asking for its members to go on strike over pay rises and working hours. The strikes are thought to impact about 260 businesses, and Friday saw the second 24-hour strike take place. These strikes are seen as warning shots before a prolonged period of industrial action takes place which could create havoc for car parts and component production.

Week ahead

It’s a very quiet week ahead regarding Eurozone economic data with only low-tier and a few medium-tier ecostats scheduled to make their way onto the market. This means euro movement could likely be primarily dictated by events elsewhere. Nonetheless, the European Central Bank (ECB) is due to release it’s Economic Bulletin on Thursday which may give markets something to talk about. Other things to watch for will be Monday’s Eurozone retail sales, Tuesday’s German factory orders and construction figures, and Wednesday’s German industrial production numbers.

USD – Non-farm payrolls bolster the buck

Last week

– US consumer confidence was on the rise in January, climbing from 123.1 to 125.4.

– The Federal Reserve opted to keep interest rates on hold at its January meeting although the comments were seen to be hawkish.

– US President Donald Trump’s State of Union Address failed to support the US dollar; the currency shrugged off promises for infrastructure spending as markets sold off the dollar. It’s thought investor sentiment ebbed as the speech lacked the clarity needed to gauge how much of an impact the plans would actually have on the US economy.

– The highly influential US non-farm payrolls number came in above forecasts at 200K in January and December’s figure was revised higher to 160K. Impressively, average hourly earnings crept higher to come in at 2.9% on the year, the most since 2009. The US dollar climbed on the news as investors saw it as a sign that the Federal Reserve would hike interest rates again in March.

Week ahead

Monday begins the week with the highly significant ISM non-manufacturing/services composite PMI which is expected to climb from 55.9 to 56.0. The rest of the week is much quieter with only medium-tier data scheduled to be released. A lot of the US dollar’s market movement is likely to be on politics and investor sentiment; the greenback has recently fallen against a host of other majors, allowing the pound to reach its highest level post-Brexit vote and the euro to attain three-year highs. However, more strong data like the non-farm payrolls figure could help to bolster the buck.

AUD – RBA speech ahead

– There are a few factors that could influence the Australian dollar this week, beginning with Monday’s securities inflation data. Tuesday will follow with Australian trade balance and retail sales stats.

– Concerning central bank developments, Tuesday will see the release of the Reserve Bank of Australia (RBA) Cash Rate target. Wednesday will continue with RBA Governor Philip Lowe giving a speech in Sydney. The central bank will issue its statement on monetary policy on Friday.

– Business confidence stats will be out on Thursday, followed by home loans on Friday.

CAD – Canadian labour market data ahead

– The main economic event to steal the show regarding the Canadian dollar this week will be the Canadian unemployment rate and net change in employment figures due out on Friday.

– However, there are some other ecostats which might give the loonie some incentive to move. Tuesday will see the release of the Ivey purchasing managers’ index, while Wednesday’s Canadian building permits might make way for some moderate movement. Thursday will continue with Canadian housing starts and new housing price data. Some Canadian central bankers will also be speaking throughout the week.

NZD – RBNZ OCR decision in focus

– This week’s dairy auction could create New Zealand dollar exchange rate movement.

– Additionally, Tuesday could see some exciting market fluctuations with New Zealand’s employment change and unemployment rate numbers coming to light.

– Wednesday will continue with the Reserve Bank of New Zealand (RBNZ) Official Cash Rate (OCR) decision, followed by a press conference from the central bank. While it’s unlikely interest rates will move, investors will be careful to listen to Governor Spencer.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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