Weekly Outlook

The events on the economic calendar this week include central bank meetings, and key releases on US, UK, and New Zealandia data.

UK inflation expected to subside

Many business owners and employees are concerned about the rise in inflation, especially as wage growth has gone up less than expected. The sharp rate of expansion for business activity in the UK during March led Britain’s service providers to a spate of positive signs. However, the economy has been in decline and business expectations have been the lowest they have been in 2 years. The main reason is that there has been strong economic uncertainty because of the war in Ukraine and rigorous cost pressures. There is a growing feeling of unease in the UK with a higher cost of living.

On Tuesday UK’s unemployment report will reveal how fast wages grew and if in tandem with the rise in inflation – something quite unlikely. Wednesday’s inflation numbers will certainly be of critical importance. The market is hoping for relief from inflation and unemployment, but, it’s unlikely that these figures will lead to any.

GBPJPY looks poised to revisit its 6-year high of 164.35 as it faces no major resistance above 162. A close above 162.36 would support the narrative. If the support at 161.55 weakens, bears could push prices lower towards 160, but it’s unlikely this gives in easily.

BOC is ready to move aggressively

The Bank of Canada is expected to raise interest rates this week. This is due to the recent comments from hawks, the inflation rates, and several economic indicators jumping out of proportion. With inflationary pressures and Russia’s invasion of Ukraine sending energy and food prices soaring, bank officials may be considering hiking interest rates up twice.

Canada’s central bank began raising the interest rate for borrowing last month. Interest rates are still low and analysts predict more hikes to come soon.

The country added another 73,000 jobs in March, bringing unemployment to the lowest number in decades, and the cost of living keeps increasing. Policymakers are concerned that the world is entering an era of persistent inflation and they are prepared to act.

NZDCAD has turned bearish following the break below its 50-SMA at 0.8636. It has now flipped to resistance and must hold any bullish attempt to back the bearishness. Its break would bring 0.8664 back into the spotlight. On the flip side, supports lie at 0.8580 and 0.8548.

ECB at crossroads

The ECB’s first meeting in the wake of Russia’s invasion of Ukraine fuelled speculation that it won’t end its mass scaling back of its asset purchase anytime soon. Policymakers had different views about how to handle soaring inflation but decided to scale back its bond purchases more quickly and potentially delay raising interest rates. However, the minutes revealed a more hawkish stance with the market pricing in two hikes by year’s end as inflation soars.

The European Central Bank’s focus on the inflationary impact of recent geopolitical developments rather than the expected hit to growth, also suggests risks of a slightly faster pace of rate hikes.

EURGBP bulls are attempting to recapture the 50-SMA at 0.8360. The current bar formation hints at a further downside as the prices received rejection and formed an indecision candlestick. If the pair closes below 0.8373, the chances of a downward leg to 0.8313 will increase. However, a close above would support a move up to 0.84 and higher.

RNBZ lacks urgency

New Zealand’s central bank is expected to raise interest rates by 25 basis points on April 13, above the start of the pandemic. Experts believe it will probably raise rates in the summer and end the year at a slightly higher rate than originally expected to try and avoid accelerating inflation, but they move slow. It has also been predicted that Ukraine’s war will further contribute to inflation. Price pressures are increasing as the labor market tightens and supply chain disruptions occur.

NZDUSD has broken its 200-SMA but found support at its 50-SMA at 0.6830. A confirmed rejection could offer a move back towards its longer moving average near 0.6888 and even 0.6950. In case the 50-day average is lost, however, the risk of sliding down to 0.6760 and below will increase.

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