FX Week Ahead – Top 5 Events: August RBNZ Meeting; UK Inflation, Canada Inflation, and Eurozone Inflation; July FOMC Minutes

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FX Week Ahead Overview:

  • The turn through the middle of August brings forth a bevy of data related to inflation data, with figures due from Canada, the Eurozone, the UK, and Japan.
  • Central banks’ stimulus withdrawal efforts will be in focus as the August Reserve Bank of New Zealand is expected to produce a rate hike, while the July FOMC meeting minutes will outline various conditions for winding down the Fed’s QE program.
  • Overall, recent changes in retail trader positioning suggest that the US Dollar has a mixed bias.

For the full week ahead, please visit the DailyFX Economic Calendar.


The weeks since the July RBNZ policy continued to produce several strong economic data reports, and it now appears the New Zealand economy has progressed far enough to warrant discussions around a rate hike. In fact, according to overnight index swaps for New Zealand, there is a 25-bps rate hike fully discounted by markets, with an 18% chance of a 50-bps rate hike. The OIS curve is very hawkish, insofar as there is a 77% chance of another 25-bps rate hike when the RBNZ meets next in October.The New Zealand Dollar retains the mantle of having the most hawkish central bank among the major currencies; ongoing hawkish forward guidance is needed to fulfill this promise, however.

08/18 WEDNESDAY | 06:00 GMT | GBP Inflation Rate (JUL)

The second inflation report in the post-Haldane era is due out this week. According to a Bloomberg News survey, the headline July UK inflation rate (CPI) is due in at +0.3% from +0.5% (m/m) and +2.3% from +2.5% (y/y), while the core inflation rate (exenergy and food) due in at +2.2% from +2.3% (y/y). Barring another upside surprise, any retracement in inflation pressures is likely to prove unsupportive to the British Pound.

08/18 WEDNESDAY | 09:00 GMT | EUR Core Inflation Rate FINAL (JUL)

According to a Bloomberg News survey, the July Eurozone core inflation rate (final CPI) is forecasted to show a slight moderation in July from +0.7% to +0.9% (y/y). Restrictions on economic activity in parts of Europe thanks to the rapid spread of the delta variant have weighed on the Euro in recent weeks. It was just in July that President Christine Lagarde remarked that policy will be “permanently accommodative,” sapping economic data releases of their potency in the near-term. As has been the case for a few weeks, especially now in less liquid markets, only a significant deviation from the estimate would likely provoke a significant move in EUR-crosses.


According to a Bloomberg News survey, the July Canada inflation rate (CPI) is forecasted to show an increase of +3.4% from +3.1% (y/y), while the core reading is due in at +2.6% from +2.7% (y/y). Still elevated beyond the BOC’s medium-term target of +2%, they will unlikely have a significant impact on policy outcomes given that the Bank of Canada is already on course to slow down its asset purchase program. For now, it seems unlikely that higher rates of inflation will translate into greater speculative fervor for a more hawkish BOC in the very near-term.


In the wake of the July FOMC meeting, and in light of the surge in the delta variant caseload in the US, traders began reducing their expectations for a more hawkish Federal Reserve. However, the combined impact of the strong July US nonfarm payrolls report – the second in a row – plus the July US inflation rate report (CPI) has sparked a shift in both market expectations and language used by FOMC policymakers thus far in August. The July FOMC minutes are likely to reflect a less hawkish point of view than what has been said by various FOMC officials in August.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

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