Central bank meetings will stay in the limelight for another week, with the Reserve Bank of Australia (RBA) and the Bank of England (BoE) expected to follow their European and US pears in raising interest rates. On the data front, the US employment report might cause fresh swings in rate expectations as the Fed indicated a more data-dependent approach. RBA policy meeting –> AUD/USD
The RBA has been raising interest rates with some breaks since March, skipping a rate increase in July for the second time. Inflation is no longer at its highest, but it’s still double the central bank’s desired 2-3% range. Analysts believe that a 25bps rate hike is possible. On the other hand, futures markets are confident that borrowing costs will stay stable for the second month in a row with a 70% probability. In any case, AUD/USD will need a rate hike and a relatively stronger hawkish communication to exit its four-month-old range above 0.6900. Yet, given the increasing caution among major central banks, the RBA may not diverge.
BoE policy meeting –> GBP/USD
The BoE will announce another rate hike on Thursday at 11:00 GMT. However, it may have difficulty deciding on the size of the increase due to the encouraging decline in the June inflation report. Also, manufacturing and services PMI figures for July are expected to further weaken ahead of the policy announcement and if that proves to be the case, analysts’ estimates for a smaller 25bps rate increase could become self-fulfilling. A surprise in voting structure may impact rate expectations and the pound, particularly if policymakers consider a pause. GBP/USD remains supported around 1.2800, while the 50-day simple moving average could also come to the rescue at 1.2700 if downside pressures strengthen.
US nonfarm payrolls –> USD/JPY
Nonfarm payrolls have been creating lively sessions in markets over the past couple of months and July’s report will not be missed either as the Fed has clearly signaled that it will take a stronger data-dependent approach in determining whether there is need for more tightening. Analysts will look whether the economy kept creating more than 200k job positions and if wage growth has inched lower to 4.2% y/y from 4.4% y/y previously. Note that forecasts are narrower this time and any surprises could move the dollar. USD/JPY is currently aiming for a close above the 142.00 bar, though a bigger increase above 144.00-145.00 is still required to put confidence back on the 2023 uptrend.
Central bank meetings will stay in the limelight for another week, with the Reserve Bank of Australia (RBA) and the Bank of England (BoE) expected to follow their European and US pears in raising interest rates. On the data front, the US employment report might cause fresh swings in rate expectations as the Fed indicated a more data-dependent approach.
RBA policy meeting –> AUD/USD
The RBA has been raising interest rates with some breaks since March, skipping a rate increase in July for the second time. Inflation is no longer at its highest, but it’s still double the central bank’s desired 2-3% range. Analysts believe that a 25bps rate hike is possible. On the other hand, futures markets are confident that borrowing costs will stay stable for the second month in a row with a 70% probability. In any case, AUD/USD will need a rate hike and a relatively stronger hawkish communication to exit its four-month-old range above 0.6900. Yet, given the increasing caution among major central banks, the RBA may not diverge.
BoE policy meeting –> GBP/USD
The BoE will announce another rate hike on Thursday at 11:00 GMT. However, it may have difficulty deciding on the size of the increase due to the encouraging decline in the June inflation report. Also, manufacturing and services PMI figures for July are expected to further weaken ahead of the policy announcement and if that proves to be the case, analysts’ estimates for a smaller 25bps rate increase could become self-fulfilling. A surprise in voting structure may impact rate expectations and the pound, particularly if policymakers consider a pause. GBP/USD remains supported around 1.2800, while the 50-day simple moving average could also come to the rescue at 1.2700 if downside pressures strengthen.
US nonfarm payrolls –> USD/JPY
Nonfarm payrolls have been creating lively sessions in markets over the past couple of months and July’s report will not be missed either as the Fed has clearly signaled that it will take a stronger data-dependent approach in determining whether there is need for more tightening. Analysts will look whether the economy kept creating more than 200k job positions and if wage growth has inched lower to 4.2% y/y from 4.4% y/y previously. Note that forecasts are narrower this time and any surprises could move the dollar. USD/JPY is currently aiming for a close above the 142.00 bar, though a bigger increase above 144.00-145.00 is still required to put confidence back on the 2023 uptrend.
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