Wednesday is when the RBNZ and BoC announce their interest rate decisions, so the New Zealand and Canadian currencies will attract special attention. US inflation data could make the FX market more volatile on the same day, shedding some extra light on whether the Fed will proceed with another rate hike this month.
US CPI inflation –> USD/JPY
Despite the significant spike in ADP employment data, Friday’s nonfarm payrolls report revealed a softer-than-expected job creation of 209k and a downward revision in May’s reading. The US dollar retreated immediately, but the odds for a 25 bps rate hike remained above 80% as the unemployment rate ticked down to 3.6% and wage growth stood resilient at 4.4% y/y, threatening a potential inflation resurgence. The US CPI data will be the next test for the greenback. The headline CPI is expected to ease significantly to 3.0% y/y, though if the core measure stays above 5.0%, resurfacing concerns that inflation is becoming entrenched, USD/JPY may drift higher to meet the 143.50 barrier.
BoC policy meeting –> USD/CAD
The Canadian dollar has been on a losing streak against the US dollar lately after a successful June. Traders are now eagerly waiting to see whether the Bank of Canada can bring buyers back into play on Wednesday. Canadian inflation slowed and unemployment rose to its highest since early 2022, showing that tightening is working. Hence, policymakers may not pause again until they see inflation sustainably returning to their 2.0% midpoint target. There is a 60% probability for a 25 bps rate hike. If the central bank stands pat or delivers a dovish rate hike, USD/CAD may bounce to challenge the key 1.3340-1.3380 resistance zone.
RBNZ policy meeting –> NZD/USD
The kiwi could barely capitalize much on the NFP miss, remaining stuck around the 0.6200 bar against the greenback. The RBNZ has clearly messaged investors during its previous policy meeting that no further rate increases will be required in the foreseeable future. If the central bank keeps its word, the policy announcement could barely trigger a meaningful rally in the NZD/USD. From a technical perspective, though, an upside correction cannot be excluded.
Wednesday is when the RBNZ and BoC announce their interest rate decisions, so the New Zealand and Canadian currencies will attract special attention. US inflation data could make the FX market more volatile on the same day, shedding some extra light on whether the Fed will proceed with another rate hike this month.
US CPI inflation –> USD/JPY
Despite the significant spike in ADP employment data, Friday’s nonfarm payrolls report revealed a softer-than-expected job creation of 209k and a downward revision in May’s reading. The US dollar retreated immediately, but the odds for a 25 bps rate hike remained above 80% as the unemployment rate ticked down to 3.6% and wage growth stood resilient at 4.4% y/y, threatening a potential inflation resurgence. The US CPI data will be the next test for the greenback. The headline CPI is expected to ease significantly to 3.0% y/y, though if the core measure stays above 5.0%, resurfacing concerns that inflation is becoming entrenched, USD/JPY may drift higher to meet the 143.50 barrier.
BoC policy meeting –> USD/CAD
The Canadian dollar has been on a losing streak against the US dollar lately after a successful June. Traders are now eagerly waiting to see whether the Bank of Canada can bring buyers back into play on Wednesday. Canadian inflation slowed and unemployment rose to its highest since early 2022, showing that tightening is working. Hence, policymakers may not pause again until they see inflation sustainably returning to their 2.0% midpoint target. There is a 60% probability for a 25 bps rate hike. If the central bank stands pat or delivers a dovish rate hike, USD/CAD may bounce to challenge the key 1.3340-1.3380 resistance zone.
RBNZ policy meeting –> NZD/USD
The kiwi could barely capitalize much on the NFP miss, remaining stuck around the 0.6200 bar against the greenback. The RBNZ has clearly messaged investors during its previous policy meeting that no further rate increases will be required in the foreseeable future. If the central bank keeps its word, the policy announcement could barely trigger a meaningful rally in the NZD/USD. From a technical perspective, though, an upside correction cannot be excluded.
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