Focus on RBNZ, Bank of Canada Interest Rate Decisions

Canada and New Zealand are set to announce interest rate decisions on Wednesday, July 13th.

Both countries and their national currencies, the CAD and NZD, are relatively influential in the world economy. Canada is a G7 member state and New Zealand is one of the world’s wealthiest OECD countries.

Bank of Canada (BoC)– headline inflation at 7.7%

The BoC is expected to raise its current key interest rate guidance from 1.5 percent to 2.25 percent. The hawkish expectations come as the central bank struggles to bring headline inflation down from 7.7 percent to a target rate of 2 percent.

If the rate hike happens as expected, the CAD may see support, but the risks of a recession in Canada might escalate. One of Canada’s largest trade partners, the US, is already on the brink of a technical recession - although employment figures in North America remain resilient.

The contradictory and complex economic forces are all part of the unusual scenario brought about by COVID-19 in combination with the impact of geopolitical events like the conflict in Ukraine on the global economy.

Reserve Bank of New Zealand (RBNZ) – headline inflation at 6.9%

The RBNZ is expected to hike its key interest rate guidance from 2 percent to 2.5 percent on Wednesday. New Zealand’s economy also showed some signs of weakness after contracting by 0.2 percent in the first quarter due to the effects of COVID-19.

If there are any surprises in the BoC and RBNZ decisions, there may be movements in the CAD and NZD currency pairs.

In related trading news, Bank of England (BoE) Governor Bailey gives a speech later today. The UK’s economy faces the highest inflation rate in the G7 nations and the BoE is under considerable pressure to tamp it down. Today’s speech may provide clues as to the BoE’s next move.

Earnings reports

Several mega-cap financial firms are set to release their earnings reports this week, including JP Morgan Chase on July 14th and Citigroup on July 15th.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.