In the second week of July 2023, a number of economic data releases will be released that will be of interest to traders, investors, and consumers alike, and can shed light on the state of global economies and their developments.
RBNZ Decision: How Will the Central Bank Handle Recession
Today, Tuesday, July 11th, New Zealand’s central bank, the RBNZ, is expected to meet and decide on interest rates. It would be interesting to keep track of the RBNZ’s rate decision since recent statistics revealed that New Zealand’s economy is in a recession due to stubbornly high inflation and ensuing rate hikes.
This means that New Zealand’s economy might be shaky. On the one hand, the central bank has to tame inflation through possible rate hikes, and on the other hand, it has to keep in mind the recessionary economy as further rate hikes can lead to a worse recession.
However, while it is yet to be determined whether or not the RBNZ will adopt a hawkish or a dovish stance this time around, analysts expect the RBNZ to follow in the Fed’s latest footsteps and keep its target rates unchanged. As such, the expectations come in at a cash rate of 5.5%. Traders will have to keep an eye on today’s decision to see if these predictions will hold true.
It might be interesting to also keep track of how the upcoming meeting might affect the NZD/USD Forex pair, which is slightly down by 0.09%, ahead of the meeting and as of the time of the writing on Tuesday perhaps keeping the downtrend it has been experiencing in the past few months.
Inflation in Focus: US CPI and More
One of this week’s major economic data may be the headline US CPI release which is due on Wednesday, July 12th. The CPI is a measure of inflation or deflation that is widely used by the Federal Reserve in their monetary policy-making decisions.
As such, the data can be crucial when it comes to the trajectory of the world’s biggest economy and given the fact that the Fed has been wavering back and forth between further hikes to tame inflation and a recent rate pause to see whether the prior hikes are working, the CPI data can be an important factor in the Fed’s upcoming rate meeting this month on July 25-26.
While core inflation is expected to remain sticky and stubbornly high, the expectations are that US CPI is expected to show a drop in June. The forecasts point at YoY headline inflation reaching 3.1% in June. If these predictions materialize then it would show that consumer prices have cooled since May’s 4%.
Core CPI, which doesn’t measure volatile food and energy, on the other hand, is not expected to show such an ostensible improvement as the predictions suggest that it is expected to come in at 5% YoY which is slightly below May’s 5.3%.
All in all, despite everything the consensus seems to be that the Fed will end up hiking rates further this year. One analyst even stated that “nothing in the release that would change our expectation that the Fed has more work to do.” Traders, as a result, are positing that the Fed will hike rates by a quarter point in their July meeting due to inflation remaining above the Fed’s 2% target range. (Source:CNN)
In addition, several Fed members, including Fed Chair, Jerome Powell, have revealed that further hikes are on the horizon and the latest FOMC minutes released last Wednesday only highlighted that. Only time will tell how and what decisions the world’s biggest economy's central bank will take and how the CPI release will come into play.
Besides the US, traders may also want to track Russia and Spain’s CPI on Wednesday and France’s CPI on Thursday to gain a better understanding of how the global economy is faring.
More Economic Releases: US Jobless Claims and Consumer Sentiment
Other releases this week include the US Jobless Claims and the University of Michigan’s Consumer Sentiment on Thursday and Friday respectively. The Jobless Claims measure unemployment rates while Consumer Sentiment gauges how optimistic consumers are about finances and the economy. (Source:Investopedia)
Accordingly, the two releases can unveil a lot about US consumers and citizens especially as the labor market has been drawing more attention lately and consumer sentiment is known to have effects on economic growth and GDP.
The Initial Jobless Claims are expected to come in at 249k which is above the previous 248k. Nonetheless, despite the slight increase in Initial Jobless Claims, Continuing Claims actually show a slight downward trend which may indicate that more people are able to get back into the labor market fast after losing their jobs.
As for the Consumer Sentiment data, the expectations come in at 64.8 which is slightly above the prior 64.4 which usually indicates a slight increase in consumer confidence. However, overall, it seems that the vast majority of consumers may still be skeptical and have their eyes on the upcoming inflation readings.
To summarize, this week brings significant releases that are worth noting for traders, analysts, and consumers, as they provide valuable insights into the future direction of the economy in the upcoming months. Traders may also keep track of any other significant events to come through Plus500’s free Economic Calendar.