Week Ahead – RBNZ to raise rates, dollar awaits Fed minutes
XM Group | Aug 13, 2021 07:45AM ET
RBNZ: Time for lift off
The main event will be the RBNZ meeting on Wednesday, when the central bank is widely expected to raise interest rates. There are clear signs that the New Zealand economy is overheating, so it is time for the Reserve Bank to step on the brakes.
Economic growth has been impressive lately, unemployment has returned to pre-crisis levels, inflation is high and rising, and the housing market is booming. Therefore, markets have fully priced in a quarter-point rate increase at this meeting, and are also assigning a 20% probability for a ‘double’ rate hike of a half-point.
Therefore, the Bank of Japan won’t be taking its foot off the accelerator anytime soon. That spells downside risks for the yen moving forward, as foreign interest rates rise but Japanese ones don’t. Outside of an episode of panic in the markets, there isn’t much that can rescue the yen.
Meanwhile in China, the monthly data dump that includes retail sales, industrial production, and fixed asset investment for July will hit the markets on Monday. Finally, the Eurozone’s GDP print for Q2 will be released Tuesday, but this is the second estimate, which markets don’t react much to.
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