Think last week’s central bank happenings caused enough ruckus in the markets?
We’ve got a couple more rate decisions lined up this week so y’all better start prepping if you wanna catch pips from these events!
For the newbie traders just tuning in, make sure you’ve read up on our School of Pipsology lesson on why these central bank announcements tend to trigger huge reactions from currencies and how their biases can shape longer-term market trends.
Now here’s what’s lined up, what happened before, and what market gurus are expecting this time.
Reserve Bank of Australia (February 7, 3:30 am GMT)
First off, we’ve got RBA Governor Lowe and his fellow policymakers gearing up to announce their monetary policy decision in the next Asian trading session.
In their December statement, the RBA assessed that commodity prices have risen and that economic conditions in its trade BFF, China, have improved.
Policymakers also judged that growth could pick up its pace at the start of the year, labor market conditions remain mixed, and that inflationary pressures could remain low.
This time around, the central bank is still expected to keep interest rates on hold at 1.50%. RBA officials might choose to highlight the recent improvements in trade and the positive outlook for the Chinese economy.
However, it’s also worth noting that Q4 CPI readings turned out much weaker than expected and the RBA might blame the Aussie’s appreciation for putting downside pressure on domestic price levels.
Reserve Bank of New Zealand (February 8, 8:00 pm GMT)
Next, we’ve got the RBNZ which previously cut interest rates from 2.00% to 1.75% in their November 2016 policy decision. At that time, Governor Graeme Wheeler cited that the Kiwi’s high exchange rate “remains higher than is sustainable for balanced economic growth and, together with low global inflation, continues to generate negative inflation in the tradables sector.”
However, he also mentioned in a press conference that the November rate cut may be the last of their easing measures for the time being since “annual inflation is expected to rise from the December quarter, reflecting the policy stimulus to date, the strength of the domestic economy, and reduced drag from tradables inflation.”
In fact, headline CPI climbed to 1.3% in Q4 and landed safely within the central bank’s 1-3% target range.
With that, no actual policy changes are expected for the RBNZ in this week’s statement as the central bank turns its attention back to the booming house market.
Recall that policymakers have usually been wary of excessive house price inflation and risks to financial stability that lower interest rates could bring.
Other points that could be mentioned in the upcoming RBNZ statement are the slowdown in employment for Q4 and the risks of weaker inflation from the overvalued Kiwi.
If these seem enough to push RBNZ back to its dovish stance, the currency could wind up returning a lot of its recent gains.