FX Markets Turn To Asia-Pacific Region For Top Drivers In Week Ahead

11/07 Tuesday | 03:30 GMT | AUD Reserve Bank of Australia Rate Decision

The Reserve Bank of Australia is expected to keep rates unchanged at 1.50% on Tuesday as the country’s growth outlook hasn’t evolved that much in recent weeks. The labor market continues to improve gradually, and it is expected that the unemployment rate will fall further in the coming years. However, with real wage growth continuing to struggle, Australian consumers face some challenges ahead. Accordingly, the RBA is unlikely to want, or need, to change its policy stance in the near future. Rates markets are not pricing in any shift in policy for the remainder of 2017, and the first chance of a move isn’t being given serious consideration until August 2018 at the earlier (51% chance of a rate hike).

Pairs to Watch: AUD/JPY, AUD/NZD, AUD/USD

11/08 Wednesday | 20:00 GMT | NZD Reserve Bank of New Zealand Rate Decision

Once again, the main way the RBNZ has the potential to hit the Kiwi is via commentary on the exchange rate. In the meetings since June, the RBNZ has noted to some extent that “A lower New Zealand dollar would help rebalance the growth outlook towards the tradables sector.” However, the New Zealand Dollar has traded mostly lower over the interim period since the last RBNZ meeting, particularly following the election of Jacinda Ardern as New Zealand PM.

The Q3’17 inflation report remains the most recent set of price data on the economy we have, and showed that will price pressures remain below the RBNZ’s +2% target, they are rising once again (+1.9% from +1.7% (y/y/)). If there is a shift in tone from the RBNZ, it will be an incremental shift in the hawkish direction. Rates markets are not pricing in any shift in policy for the remainder of 2017, and the first chance of a move isn’t being given serious consideration until August 2018 at the earlier (57% chance of a rate hike).