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US data at the forefront in the build-up to this week’s US Fed rate decision

business-articlesUS data at the forefront in the build-up to this week’s US Fed rate decision
  • CAD - Canadian GDP
  • USD - US ISM manufacturing and employment indexes
  • NZD - New Zealand employment
Canadian economic growth expected to accelerate

Canada’s February GDP data will attract the most attention today for the ‘Loonie’, with positive contributions from manufacturing, retail and residential construction expected to have provided a small boost.

Analysts are currently forecasting a month-on-month rise of 0.2%, up from the previous month’s decline of -0.1%.

If this occurs then traders may raise their expectations of tighter monetary policy at the Bank of Canada (BoC), particularly with bank governor Stephen Poloz indicating that more interest rate hikes could be coming amid accelerating wage growth and consumer price inflation.

This trend will have to continue, however, in order for the bank to pull the trigger.

Nonetheless, an upbeat reading could give the ‘Loonie’ a sizable lift, though this will also depend on the current performance of the US Dollar (USD).

Big US data ahead of the Federal Reserve rate decision

After yesterday’s upbeat rise in US personal consumption expenditure (PCE) – the preferred measure of inflation for the US Federal Reserve – market anticipation for a rate hike this week is now at fever pitch.

Investors will have to wait until Wednesday for the rate decision announcement, however, with the market focus expected to briefly shift today to the latest Institute for Supply Management (ISM) survey results for April.

These readings give insight into inflation and labour conditions through the prices paid and employment subcategories – two very significant health indicators for the US economy – and indeed, if these prove upbeat, then it could push the Fed even closer towards an aggressive cycle of monetary tightening this year.

New Zealand dollar (NZD) volatility expected on GDT auction and unemployment results

The third big-event on today’s data release list concerns the New Zealand dollar (NZD), with the imminent global dairy trade (GDT) auction and the latest unemployment change results expected to provoke some volatility.

The previous dairy auction resulted in a sizable rise in dairy prices – great news for New Zealand and the ‘Kiwi’ dollar - but whether this will continue will remain heavily dependent on the supply situation on New Zealand farms.

On the unemployment front, markets are expecting a rise from 4.5% to 4.6% in Q1 2018, an outcome that could push the Reserve Bank of New Zealand (RBNZ) towards the dovish end of the spectrum in tomorrow’s rate decision.

Moreover, analysts are not expecting a rate hike from the bank tomorrow, especially given the recent poor performance of inflation.

The attitude of the central bank, however, could knock NZD up or down.
 
Upcoming data

Tuesday 1 May
09:30 GBP – UK Markit Manufacturing PMI (April)
09:30 GBP – UK BoE Consumer Credit (March)
13:30 CAD – Canadian GDP Growth Rate (Feb)
14:45 USD – US ISM Manufacturing, Employment (April)
15:40 NZD – New Zealand Global Dairy Trade Price Index (Bi-Weekly)
19:30 CAD – Bank of Canada Governor Poloz Speech
22:45 NZD – New Zealand Unemployment Rate (Q1)
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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