10thApril 2024
Monday
April 10th is shaping up to bea pivotal day for financial markets worldwide, with a lineup of importanteconomic updates on the horizon. New Zealand will reveal its Official CashRate, offering insights into its monetary policy trends. Meanwhile, in theUnited States, the spotlight will be on key inflation data, including both themonthly and annual Core CPI, as well as the Federal Open Market Committee(FOMC) Meeting Minutes, which are expected to shed light on future U.S.monetary policies. In Canada, the focus will be on the Interest Rateannouncement and a subsequent press conference that will discuss the nation'seconomic forecast and the implications of its monetary policies. These combinedannouncements are likely to have a substantial impact on market dynamics andinvestor strategies.
NZD - OfficialCash Rate
The Reserve Bank of New Zealand (RBNZ) sets the Official Cash Rate (OCR) during its seven annual monetary policy meetings, influencing borrowing costs and economic activity in New Zealand. Changes to the OCR, aimed at controlling inflation, directly affect the New Zealand Dollar (NZD)'s value; a rate hike, indicating inflationary concerns, typically strengthens the NZD, while a cut suggests lower inflation and can weaken it. These decisions, along with economic assessments and future policy indications provided by the RBNZ, particularly during Governor Adrian Orr's press conferences, are crucial for traders and investors in forecasting NZD's market movements.
In its inaugural policy meeting of 2024, the Reserve Bank of New Zealand held the official cash rate steady at 5.5%, marking the fifth consecutive meeting without a change, in line with market expectations. The central bank acknowledged a decrease in core inflation and inflation expectations, noting a more balanced inflation outlook, yet emphasized that headline inflation still exceeds the 1 to 3% target range. Despite a slight reduction in its peak cash rate forecast to 5.6% from the previously projected 5.7%, the committee believes the rate must remain restrictive to curb inflation, with anticipations of monetary easing not until mid-2025. The bank also projected modest near-term economic growth, citing mixed domestic data, a continued weak economic outlook for China, its primary trading partner, and the likelihood of prolonged hawkish stances from global central banks to address ongoing inflationary pressures.
TL;DR
Aspect
Details
1 Event
Inaugural policy meeting of 2024 by the Reserve Bank of New Zealand
2 Decision on Official Cash Rate
Held steady at 5.5%
3 Consecutive Meetings Without Change
Fifth
4 Market Expectation
In line; no change anticipated
5 Core Inflation
Decrease noted
6 Inflation Expectations
Decrease noted
7 Inflation Outlook
More balanced, but headline inflation still above target range (1-3%)
8 Peak Cash Rate Forecast
Reduced to 5.6% from 5.7%
9 Monetary Policy Stance
Restrictive, to curb inflation; no easing expected until mid-2025
10 Economic Growth Outlook
Modest near-term growth expected
11 Domestic Data
Mixed
12 China's Economic Outlook
Weak; significant as China is a primary trading partner
13 Global Central Banks' Stance
Likely prolonged hawkish to address inflation
14 Aspect
Details
The projected outcome for the ReserveBank of New Zealand's Interest Rate decision suggests it will remain steady at the previous rate of 5.5%, with no changes anticipated.
The next Interest Ratedecision is set to take place on Wednesday at 2:00 AM GMT.
USD - Core CPIm/m
The Consumer Price Index (CPI), a monthly measure compiled by the US Department of Labor Statistics, reflects changes in the prices of a basket of goods and services, excluding the more volatile food and energy categories to present the Core CPI or CPI Ex Food & Energy. Released roughly 16 days post-month-end, this data is critical for gauging inflationary or deflationary trends, with a high CPI reading typically boosting the US Dollar (USD) due to expectations of interest rate hikes by the central bank to contain inflation. Given the significant impact of consumer prices on overall inflation, the Core CPI data is closely monitored by traders and the Federal Open Market Committee, as it offers a clearer view of underlying price pressures without the distortion from food and energy price volatility.
In February, the index for all items excluding food and energy experienced a 0.4 % rise, mirroring January's increase. Several indexes saw upward movements during the month, notably including shelter, airline fares, motor vehicle insurance, apparel, and recreation. Conversely, the indexes for personal care and household furnishings and operations witnessed decreases over the same period.
TL;DR
- February saw a 0.4% rise in the index for all items excluding food and energy, matching January's increase.
- Notable increases in indexes for shelter, airline fares, motor vehicle insurance, apparel, and recreation.
- Decreases were observed in the indexes for personal care and household furnishings and operations.
The forecast for the CPI m/m suggests the inflation will reach 3%, from the prior level of 0.4%.
USD - CPI m/m
The monthly Consumer Price Index (CPI) measures the change in prices for goods and services consumed, released about 16 days after each month ends. This indicator is vital for traders as it reflects the bulk of overall inflation, influencing currency values by potentially prompting central bank interest rate adjustments to manage inflation. The CPI is determined by comparing the current prices of a diverse set of goods and services against those from the previous period, providing insight into inflationary or deflationary trends within the economy.
The latest report from the U.S. Bureau of Labor Statistics unveils a notable uptick in the Consumer Price Index for All Urban Consumers (CPI-U). In February, the index surged by 0.4 % on a seasonally adjusted basis, building upon January's 0.3 % rise. Over the preceding 12 months, the all-items index saw a substantial 3.2 %increase before seasonal adjustment. This data release underscores ongoing shifts in consumer pricing dynamics and may influence market sentiments and economic policies moving forward.
The forecast for the monthly Consumer Price Index (CPI) shows a slight decrease to 0.3%, down from the previous result of 0.4%.
USD - CPI y/y
The Consumer Price Index (CPI), which measures the change in the price of goods and services purchased by consumers, is a critical gauge of inflation released monthly, roughly 16 days after the month concludes. Unlike many other economic indicators, the CPI is not seasonally adjusted, providing a raw snapshot of consumer price movements. Its significance lies in the fact that consumer prices comprise a majority of overall inflation, a vital factor in currency valuation. Inflationary pressures prompt central banks to adjust interest rates in line with their mandates to contain inflation. The CPI calculation involves sampling the average prices of a variety of goods and services and comparing these to previous samplings, offering insights into the inflationary trends that are crucial for traders and policymakers alike.
In the 12 months leading up to February, the all items index witnessed a 3.2 % increase, surpassing the 3.1 % rise observed in the previous 12-month period ending January. Meanwhile, the all items excluding food and energy index experienced a notable 3.8 percent uptick over the past year. Notably, the energy index saw a decline of 1.9 % for the 12 months ending February, contrasting with a 2.2 % increase in the food index over the same period.
TL;DR
- All items index increased by 3.2% over 12 months to February, slightly up from a 3.1% rise in the prior period.
- Excluding food and energy, the index rose by 3.8% over the past year.
- Energy index decreased by 1.9% over the same 12-month period.
- Food index saw a 2.2% increase in the 12 months ending February.
The projected CPI y/y is anticipated to be 3.4%, showing a slight increase from the previous rate of 3.2%.
The forthcoming announcements for allCPI data is set for Wednesday at 12:30 PM GMT.
CAD - OvernightRate
Traders prioritize short-term interest rates as the crucial determinant in currency valuation, closely monitoring other economic indicators primarily to forecast potential shifts in these rates. When the Bank of Canada adjusts interest rates in response to inflation forecasts—raising them to counteract high inflation (a hawkish stance) or lowering them to stimulate the economy amid low inflation (a dovish stance)—such actions significantly influence the Canadian Dollar's attractiveness to foreign investors. Higher rates typically bolster the CAD by attracting foreign capital, while lower rates can weaken it by reducing foreign investment inflows.
The Bank of Canada decided to keep its overnight rate steady at 5%, while also persisting with its quantitative tightening strategy, amidst uncertain global economic conditions. The decision came in response to a mixed economic landscape, where global growth has decelerated, with the US displaying resilience but growth in the Eurozone coming to a halt. Surprisingly, the Canadian economy outperformed expectations in the last quarter of the year, showing modest expansion. The employment growth rate, however, lagged behind population increases, hinting at a possible reduction in wage pressure. In January, the Consumer Price Index (CPI) inflation fell to 2.9%, driven primarily by housing costs, although there was a notable easing in the inflation of goods prices. Nevertheless, concerns about underlying inflation persisted, as core inflation rates remained above the target range. The Governing Council of the Bank reiterated its dedication to maintaining price stability, emphasizing the significance of closely watching the balance between demand and supply, inflation expectations, wage growth, and corporate pricing practices in guiding its future decisions.
TL;DR
Aspect
Details
1 Bank's Decision
Overnight rate maintained at 5%; continuation of quantitative tightening
2 Global Economic Conditions
Uncertain; global growth slowing, US resilient, Eurozone stagnant
3 Canadian Economy
Outperformed expectations with modest expansion in last quarter
4 Employment Growth
Lagged behind population growth, suggesting reduced wage pressure
5 CPI Inflation in January
Fell to 2.9%, mainly due to housing costs; easing in goods price inflation
6 Core Inflation
Remains a concern, staying above target range
7 Bank's Focus
Maintaining price stability, monitoring demand-supply balance, inflation expectations, wage growth, and corporate pricing practices
The projection for the Bank ofCanada's Interest Rate Decision suggests it will remain unchanged from the previous rate of 5%.
The next Interest Rate Decision is scheduled for release on Wednesday at 1:45 PM GMT.
BOC - BOC PressConference
Following Bank of Canada (BoC) meetings and the publication of the Monetary Policy Report, the BoC Governor and Senior Deputy Governor conduct a press conference, which begins with a prepared statement and then opens up to media questions. This event is crucial for traders as it's a key channel through which the BoC communicates its monetary policy stance to investors. Hawkish remarks during the conference can strengthen the Canadian Dollar (CAD), while dovish tones may weaken it. The question-and-answer segment, in particular, can lead to unscripted responses, significantly influencing market volatility. This conference, which is also webcasted on the BoC's website, provides insights into the economic and inflationary outlook that shaped the latest interest rate decision and offers hints about future monetary policies.
TL;DR
- Post-meeting press conferences by BoC Governor and Senior Deputy Governor provide insights into monetary policy.
- Begins with a statement, followed by a media Q&A session.
- Hawkish remarks can strengthen CAD; dovish tones may weaken it.
- Q&A responses can significantly impact market volatility.
- Webcasted on BoC's website, it sheds light on economic outlook and future monetary policies.
BOC Press Conference is set to take place on Wednesday at 2:30 PM GMT.
USD - FOMCMeeting Minutes
Traders closely monitor the minutes of the Federal Open Market Committee (FOMC), released three weeks after policy decisions, for insights into the economic and financial considerations influencing interest rate adjustments. The tone of these minutes can significantly impact the USD, with a bullish outlook boosting the currency and a dovish stance potentially weakening it. The market's response to the FOMC minutes might be delayed due to the immediate availability of the document only at the time of release, unlike the FOMC's Policy Statement.
The next FOMC Meeting Minutes is set to take place on Wednesday at 6:00 PM GMT.
