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May 24, 2021

The Week Ahead: RBNZ, GDP & PCE

Bart Kurek

Let's look at the news event's we've got lining up this week...

(NZD) RBNZ Monetary Policy Statement

The Reserve Bank of New Zealand (RBNZ) Monetary Policy Decision meeting is on Wednesday, and it's expected that no actual interest rate changes are due.

The RBNZ is beginning to get pressured to reduce its large-scale asset purchases as other central banks such as the BoC and the BoE have done so. New Zealand's economic data has also been more or less steady, with the recent quarterly retail sales reporting surprising gains instead of projected declines. However, the RBNZ may still let inflation exceed its target before shifting to a more hawkish stance.

(USD) Prelim GDP

A Gross Domestic Product (GDP) report is a measure of the size and health of a country's economy over a period of time. The figure sums up the country's performance in terms of trade, consumer activity, government spending and investment during a particular period.

The Preliminary GDP for the first quarter of the year is expected to come out at a 6.4% growth, which is a pretty strong figure. Remember that an "Actual" greater than the "Forecast" is good for the economy, and hence if this number comes out pretty strong, we should see massive volatility in the Dollar.

(USD) Core PCE Price Index m/m

The Core Personal Consumption Expenses (PCE) Price Index shows the change in prices for a fixed basket of consumer goods and services purchased by US citizens in a reported month compared to a previous month. This indicator is also known as the "PCE deflator", and it takes into account households' actual and imputed spending on durable and non-durable goods and services. Prices for food and energy are excluded from the core index calculation due to their high volatility.

We are expecting to see an uptick in price pressures from 0.4% to 0.6% in April. This would bring the annual rate to 2.4%, which is the highest level since 2007!

This report could cause huge volatility to Dollar pairs as this is the FED's preferred inflation measure. However, if the "Actual" is weaker than the "Forecast" this is bad for a currency and could mean that the FED might push back its taper talks.

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