The markets will be looking to a rather slow week of trading. The week ahead will see only the RBNZ’s monetary policy meeting as the key event of the week. No changes are expected from the RBNZ with the OCR steady at 1.75%.
The Bank of Mexico will be another central bank that will be holding its monetary policy meeting this week. No changes are expected from the Mexican central bank; however, inflation data which is due to be released this week is expected to rise further.
In the US a slow week will see Friday’s consumer prices data coming out. Inflation is forecast to show a modest increase.
RBNZ to keep OCR unchanged, downside risks prevail
The Reserve Bank of New Zealand’s monetary policy meeting this week will see the central bank holding the OCR unchanged at 1.75%. The central bank is also likely to reiterate that its current monetary policy will be on hold for the foreseeable future.
The RBNZ’s policy statement comes with the dovish risks considering that inflation has slipped below the lower band of 2%. At the most recent inflation report, New Zealand’s consumer prices were seen rising just 1.7%, after briefly rising above 2% in the first quarter of the year.
Some part of the NZD’s appreciation comes due to the fact that traders have been anticipating an interest rate hike from the central bank. The RBNZ could thus use this monetary policy meeting to expunge any hints of a rate hike with its dovish forward guidance.
The next main data point for the New Zealand dollar will be the second quarter GDP report. This will only be released in September, which gives further room for the RBNZ to stay on the sidelines.
There is also a possibility that the central bank could refer to the higher exchange rate of the New Zealand dollar, which is expected to further dampen inflation expectations.
The NZD inflation expectations will be released today and could signal where consumer prices are heading in the future.
Read more; https://www.orbex.com/blog/2017/08/fx-week-ahead-rbnz-meeting-u-s-inflation/