The US dollar continues to trade near critical levels, and the markets are still waiting for a directional break, but commodity dollars like the New Zealand dollar and Canadian dollar have started to tumble below key support. With important rate decisions due to be announced and major employment and consumption indicators due to be released, this week could be one in which we finally see meaningful breakouts.
- Reserve Bank of New Zealand Rate Decision - March 11
According to a Bloomberg News poll of economists, the Reserve Bank of New Zealand (RBNZ) is forecasted to cut rates by 75 basis points to 2.75 percent. Meanwhile, Credit Suisse overnight index swaps are pricing in at least a 50 basis point cut, but are also pricing in a 56 percent chance of a 75 basis point reduction. Based on the RBNZ’s policy statement from January, the central bank is still open to making monetary policy more accommodative, but they will not seek to implement the same aggressive cuts they’ve applied in the past as they said that they would “expect any further reductions to be smaller than those seen recently.” With growth still slowing, the financial markets not yet stable, and inflation pressures receding, the odds are in favor of a 75 basis point cut at 16:00 ET on Wednesday. However, the outlook for the New Zealand dollar will hinge upon their policy statement, as indications that they are open to further cuts could weigh on the currency. However, if the RBNZ suggests in their policy statement that they will leave monetary policy unchanged going forward, the New Zealand dollar could actually rally. - Australian Employment Change, Unemployment Rate (FEB) - March 11
The Australian labor markets started to deteriorate during the second half of 2008, and this is likely to continue through 2009. Indeed, the February unemployment rate is forecasted to rise to a nearly three-year high of 5.0 percent from 4.8 percent, while the net employment change is anticipated to fall by 20,000. The latter report tends to have a greater impact on the Aussie since the figure rarely meets expectations and can lead to volatile short-term price action for the Australian dollar immediately following the news at 20:30 EDT. - Swiss National Bank Rate Decision - March 12
The Swiss National Bank is expected to cut their 3-month Libor target rate down to a range of 0.0 percent - 0.50 percent from 0.0 percent - 1.00 percent, as Q4 GDP contracted for the second straight quarter at a rate of 0.3 percent while February’s CPI numbers show that inflation is barely holding positive at an annual rate of 0.2 percent. The Swiss economy has taken a severe hit from waning demand for Swiss goods by the country’s European neighbors, as exports fell 8.1 percent in Q4. With this scenario unlikely to change anytime soon, the odds remain in favor of another rate cut by the SNB, but ultimately the news may not have a large impact on the Swiss franc because the change is so minimal and as interest rates fall lower, changes have less of an impact on the economy and financial markets. It is worth noting that the Swiss franc did tumble against most of its major counterparts when the SNB last cut rates in December, but gained against the greenback, so a repeat may not be out of the question. - US Advance Retail Sales (FEB) - March 12
The Commerce Department is forecasted to report that US retail sales fell negative for the seventh time during the past eight months in February, as deteriorating labor markets, tight credit conditions, and a year-long recession weighs heavy on the minds of consumers. More specifically, advance retail sales are anticipated to have contracted 0.5 percent during the month, and excluding auto sales are expected to have slumped 0.2 percent, marking what may end up being a consistent trend through the first half of 2009. As we saw with US non-farm payrolls, the impact of a disappointing result may be mixed, as the Federal Reserve has already cut the fed funds target to a record low range of 0.0 percent - 0.25 percent and has no room to cut further. - Canadian Employment Change (FEB) - March 13
At 7:00 ET, the Canadian net employment change is forecasted to have fallen by 50,000 during February after plunging a record 129,000 in January alone. Furthermore, the unemployment rate is anticipated to have risen to match the nearly five-year high of 7.4 percent from 7.2 percent. Since the employment change tends to be a very volatile release, this should have the greater impact on the Canadian dollar, with a sharper than expected drop likely to weigh on the currency and an unexpected positive result likely to push it higher.
See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.
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