Breaking News
LAST CHANCE for Cyber Monday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Week Ahead – RBNZ And BoC To Stay On taper Path, Delta Strain Angst For BoJ

By XM Group (Trading Point )ForexJul 09, 2021 09:33AM ET
Week Ahead – RBNZ And BoC To Stay On taper Path, Delta Strain Angst For BoJ
By XM Group (Trading Point )   |  Jul 09, 2021 09:33AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
It will be a busy week as the Bank of Canada, Bank of Japan and the Reserve Bank of New Zealand all meet, while inflation will take centre stage on the data front. With increasing concerns that the new Delta Covid variant could scupper reopening plans around the world, Japanese policymakers are the most likely to strike a more cautious tone, but the BoC and RBNZ will probably maintain their optimism for now. After the Federal Reserve signalled that a taper decision was not imminent, markets might take a more relaxed view on the latest CPI readings in the United States. Meanwhile, Q2 GDP numbers will be watched in China for signs that the recovery in the world’s second largest economy may be plateauing.

Will RBNZ add fuel to November rate hike calls?

There’s been a sudden shift in RBNZ rate hike expectations over the past week after a closely watched business confidence gauge jumped to the highest in four years in Q2. The survey was the latest to point to improving sentiment across New Zealand as the country appears to be coming out of the pandemic hole much quicker than other advanced economies. Subsequently, market participants have brought forward the timing of how soon the RBNZ will hike rates, pricing in a near two-thirds possibility of higher rates by November 2021 compared to earlier predictions of August 2022.

For the July meeting, however, the RBNZ is almost certain to keep its policy settings on hold when it meets on Wednesday. Nevertheless, investors will be scrutinizing the language in the statement as upbeat remarks about the economy would reinforce expectations that a rate hike is likely to come sooner rather than later. Although it can’t be ruled out that policymakers might emphasize that the outlook has become less certain following the spike in infections in the region, the likelihood is very slim given that New Zealand has so far avoided a major outbreak of the Delta variant.

China’s recovery may be cooling

China will report GDP numbers for the second quarter on Thursday and the data may add to the current jitters about a weakening growth outlook if they are worse than what is being anticipated. The Chinese economy grew by a staggering 18.3% year-on-year in the first three months of the year. However, the figure was inflated due to the low base effect of the prior year when GDP had slumped during the Q1 2020 lockdown. Moreover, recent PMI prints have been somewhat on the soft side. The forecast for Q2 is GDP growth of 8% y/y.

The monthly readings for industrial production and retail sales are also due on Thursday, which will be preceded by June trade figures on Tuesday. Should the barrage of data not do much in terms of shoring up confidence about the growth picture, especially as the rampant spread of the Delta variant is forcing fresh shutdowns in many parts of the world, market sentiment might take a hit. This could weigh on risk assets such as stocks, as well as hurt the China-sensitive Australian dollar.

BoC unlikely to be deterred by virus fears

The Bank of Canada will announce its policy decision hours after the RBNZ on Wednesday. A further reduction in QE is expected, with policymakers slowing the pace of bond purchases from C$3 billion to C$2 billion a week. The Bank will also publish updated economic projections and could reveal whether it is still pencilling in a rate increase for the second half of 2022.

Back in April, policymakers formally set an exit course out of the pandemic stimulus and although since then, a new threat has emerged in the form of the Delta variant, daily infections in Canada remain very low so there’s not much chance of the Bank turning more cautious. If anything, policymakers could reaffirm their optimism following the BoC’s rosy business outlook survey released just this week.

BoJ gloom to reflect Japan’s Olympic and virus woes

The Bank of Japan will not have as much to cheer about when it concludes its two-day policy meeting on Friday. The BoJ looks set to lower its growth projections for the current fiscal year when it releases its quarterly outlook report alongside its policy decision, which is expected to remain unchanged. Many regions in Japan are only now coming out of weeks of state of emergencies that were imposed to fight the country’s fourth virus wave. However, the capital Tokyo has been placed back under restrictions to prevent another surge when the Olympic Games start later in July. Thus, after an initial strong rebound, Japan’s road to recovery has unexpectedly become very bumpy.

What this all means for monetary policy is that the Bank of Japan is nowhere near normalizing policy, and it’s left little doubt that the BoJ will be engaged in QE long after other central banks have exited theirs.

US CPI may not set markets alight but retail sales might

Over in the US, the main highlights will be the CPI report for June on Tuesday and retail sales figures on Friday. The month-on-month CPI rate could ease further in June, with forecasts pointing to a 0.4% increase, which would be down from the prior month’s rate of 0.6% and 0.8% in April. The annual rate is also forecast to moderate to 4.9% compared to May’s 13-year high of 5.0%.

However, with the surge in inflation having so far failed to alarm the Fed enough to press the brakes on stimulus, the June readings probably won’t either, especially after the minutes of the June FOMC meeting indicated policymakers have yet to see sufficient progress towards their goals that would warrant bringing forward a decision on tapering. What could, though, shift Fed expectations slightly are June’s retail sales prints.

Retail sales dipped 1.3% m/m in May as the boosts from the stimulus payments and reopening of the economy waned somewhat. Analysts are not anticipating a rebound for June and another disappointing month would support the case for FOMC members to be “patient” before announcing changes to the pace of asset purchases. However, a stronger-than-expected number could sway the odds in favour of earlier tapering, potentially giving the bullish dollar another leg up.

Week Ahead – RBNZ And BoC To Stay On taper Path, Delta Strain Angst For BoJ

Related Articles

Kenny Fisher
CAD Sinks To 2-Month Low, GDP Next By Kenny Fisher - Nov 29, 2021

The Canadian dollar is unchanged on Monday, following sharp losses in the Friday session. In North American trade, USD/CAD is trading at 1.2789, up 0.01% on the day. Omicron Sends...

Week Ahead – RBNZ And BoC To Stay On taper Path, Delta Strain Angst For BoJ

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email