FX Week Ahead - August RBNZ Meeting; UK Inflation, Canada Inflation, And Eurozone Inflation; July FOMC Minutes

08/18 WEDNESDAY | 02:00 GMT | NZD RESERVE BANK OF NEW ZEALAND RATE DECISION

The weeks since the July RBNZ policy continued to produce several strong economic data reports, and it now appears the New Zealand economy has progressed far enough to warrant discussions around a rate hike. In fact, according to overnight index swaps for New Zealand, there is a 25-bps rate hike fully discounted by markets, with an 18% chance of a 50-bps rate hike. The OIS curve is very hawkish, insofar as there is a 77% chance of another 25-bps rate hike when the RBNZ meets next in October.The New Zealand Dollar retains the mantle of having the most hawkish central bank among the major currencies; ongoing hawkish forward guidance is needed to fulfill this promise, however.

08/18 WEDNESDAY | 06:00 GMT | GBP INFLATION RATE (JUL)

The second inflation report in the post-Haldane era is due out this week. According to a Bloomberg News survey, the headline July UK inflation rate (CPI) is due in at +0.3% from +0.5% (m/m) and +2.3% from +2.5% (y/y), while the core inflation rate (ex-energy and food) due in at +2.2% from +2.3% (y/y). Barring another upside surprise, any retracement in inflation pressures is likely to prove unsupportive to the British Pound.

08/18 WEDNESDAY | 09:00 GMT | EUR CORE INFLATION RATE FINAL (JUL)

According to a Bloomberg News survey, the July Eurozone core inflation rate (final CPI) is forecasted to show a slight moderation in July from +0.7% to +0.9% (y/y). Restrictions on economic activity in parts of Europe thanks to the rapid spread of the delta variant have weighed on the Euro in recent weeks. It was just in July that President Christine Lagarde remarked that policy will be “permanently accommodative,” sapping economic data releases of their potency in the near-term. As has been the case for a few weeks, especially now in less liquid markets, only a significant deviation from the estimate would likely provoke a significant move in EUR-crosses.

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