The RBNZ is expected to raise rates this week while the FOMC meeting minutes could confirm the likelihood of the return of 50bps rate hikes.
A new set of PMI reports from the U.S., Australia, Japan, and Europe should also give clues on the pace of global economic recovery.
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 potential market movers this week:
Major Economic Events:
Global PMI reports – This week’s parade of manufacturing and services PMIs should give us a clearer picture of global growth trends.
Australia’s manufacturing PMI (Feb 20, 10:00 pm GMT) is expected to dip to contraction territory following a weak reading in January. The services PMI might edge closer to the 50.0 mark with a 49.4 reading, however.
Both of Japan’s PMIs (Feb 21, 12:30 am GMT) are seen improving from their January numbers as output and new orders continue to gain strength.
After stalling in Q4 2022, manufacturing and services activity in France, Germany, the Eurozone, and the U.K. (Feb 21, 8:15 – 9:30 am GMT) are expected to extend their slight recoveries this year.
Last but not least is the U.S. (Feb 21, 2:45 pm GMT), which is expected to break three consecutive months of declines in both the manufacturing and services sectors.
RBNZ’s policy decision (Feb 22, 1:00 am GMT) – After raising its rates by 75bps, the Reserve Bank of New Zealand (RBNZ) is now expected to slow down to a 50bps rate hike.
And why not? Since the November decision inflation has undershot the RBNZ’s estimates, Cyclone Gabriel has damaged the economy, and inflationary pressures from around the world look to be peaking.
Don’t discount the possibility of a hawkish rate hike though. Some traders are speculating that the central bank would return to its aggressive tightening measures as soon as the economy has somewhat recovered from the cyclone’s effects.
FOMC meeting minutes (Feb 22, 7:00 am GMT) – We saw from last week’s lineup of FOMC speeches that members are still favoring further rate hikes in the foreseeable future.
Just how many are willing to crank it back up to 50bps per meeting or hold rates higher for longer may be revealed when February’s meeting minutes are released this week.
Forex Setup of the Week: EUR/USD
A bunch of PMI reports from the Eurozone and the Fed releasing its latest meeting minutes means we gotta pay attention to EUR/USD!
The pair just popped up a long wick around the 1.0600 – 1.0700 area that has been a major inflection zone for bulls and bears since early 2022.What makes the bullish wick more interesting is that it also appeared while price is hugging an ascending channel support and the 61.8% Fibonacci pullback of January’s upswing.
Can EUR/USD extend its gains now that the 100 SMA is also above the 200 SMA?
The strength of any bullish momentum could depend on this week’s set of PMI data from the Eurozone. Word around is that we’ll see improvements in manufacturing and services activity but probably not much better than what we saw in January.
Then again, traders could focus more on the Fed’s tightening prospects. We already know that a bunch of Fed members favor more tightening but the meeting minutes would show just how hawkish most members are in the foreseeable future.