FX Week Ahead: GDP revisions and RBNZ Meeting

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The markets head into the final week of the third quarter of the year. The economic calendar is relatively light over the course of the week. GDP reports make the major theme as the U.S. and the UK will be reporting on the final revised GDP numbers for the first quarter.

Elsewhere, Canada will be releasing its monthly GDP numbers. Data from the Eurozone will see the release of the preliminary inflation figures covering the month of June.

Here’s a quick recap of the economic events for the week ahead.

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A busy week awaits the U.S. dollar

The economic calendar for the U.S. dollar looks to a busy week with lot of economic releases lined up. Following the Fed’s recent decision to hike interest rates and announcing two additional rate hikes for the rest of this year, investors will be focusing on the incoming data to validate the Fed’s forward guidance.

Starting the week, the U.S durable goods orders report will be coming out. The data is expected to show that core durable goods advanced at a slower pace of 0.5% on the month. This marks a slower pace compared to 0.9% increase registered the month before. The headline durable goods orders are forecast to decline 0.4% on the month and marks a decline following a 1.6% drop in the month before.

The ongoing trade wars are likely to keep sentiment among businesses subdued which could contribute to further declines.

A lot of housing market data is also lined up including the new home sales which is forecast to rise 1% on the month. This marks a rebound following a 1.5% decline posted the month before. Housing market data released last week remained mixed with housing starts posting a strong increase on the month.

Pending home sales is also expected to rebound 1% following a 1.3% decline registered the month before.

Later in the week, the final GDP report for the first quarter will be released. Economists polled expect no changes to the GDP figures. The second revised estimates showed that the U.S. economy advanced 2.2% on the quarter.

Forecasts also show that no changes could be expected to the GDP price index which was seen at 1.9% on the quarter but the core PCE price index is expected to be revised higher to 2.5%, up from 2.3% that was reported previously.

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RBNZ expected to keep OCR unchanged

The Reserve Bank of New Zealand will be meeting this week for its monetary policy decision. According to the economists polled, the central bank is expected to maintain the Overnight Cash Rate (OCR) unchanged at 1.75%.

The RBNZ last cut interest rates in November 2016 from 2.0% to 1.75% and held the OCR steady ever since. The steady pace of monetary policy came amid ups and downs in the New Zealand’s economy. Consumer prices remained weak leaving the RBNZ to remain on the sidelines.

Recent economic data from New Zealand showed that the quarterly GDP covering the first three months of the year was seen rising at a pace of just 0.5%. This was a subdued pace of increase following a 0.6% increase seen in the final quarter of 2017.

On an annualized basis, New Zealand’s GDP advanced at a pace of 2.7%. The GDP report underlined the fact that the economic momentum had eased with firms taking a cautious approach to the new government and also developments in the housing markets. While telecommunications sector contributed over 2% to the GDP, construction sector was seen falling 1.0% during the period.

With the economy not showing any real signs of a rebound, the RBNZ is expected to remain on the sidelines and it is also unlikely that there will be any changes to the monetary policy statement or forward guidance at this week’s meeting.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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