Despite being a holiday-shortened week in the US (Thanksgiving Day on 25 Oct), markets could be in for a couple of surprises amidst these scheduled economic data releases and corporate events:
Monday, November 22
- CNY: China loan prime rate
- EUR: Eurozone November consumer confidence
- USD: President Biden to announce Fed Chair this week?
- Zoom Q3 earnings (after US markets close)
Tuesday, November 23
- GBP: BOE’s Jonathan Haskel speech, UK November PMIs
- EUR: Eurozone November PMIs, Germany Q3 GDP (final)
- USD: US November PMIs
- Dollar Tree Q3 earnings (before US markets open)
- Best Buy Q3 earnings (before US markets open)
- XPeng Q3 earnings (before US markets open)
- Analog Devices Q3 earnings (before US markets open)
- HP Q3 earnings (after US markets close)
- Dell Q3 earnings (after US markets close)
Wednesday, November 24
- NZD: RBNZ rate decision
- USD: US weekly initial jobless claims, 3Q GDP (second estimate), October personal income and spending, October PCE deflator, November consumer sentiment (final print)
- US crude: EIA weekly US crude oil inventory report
- USD: FOMC minutes release
Thursday, November 25
- NZD: New Zealand October trade
- EUR: Germany December consumer confidence
- EUR: ECB President Christine Lagarde speech
- GBP: BOE Governor Andrew Bailey speech
- Thanksgiving Day: US markets closed
Friday, November 26
- AUD: Australia October retail sales
- GBP: BOE Chief Economist Huw Pill speech
- EUR: ECB President Christine Lagarde speech
The New Zealand dollar is the best performing G10 currency versus the US dollar so far this quarter, and is the only one that can lay claim to an advance against the greenback since end-June.
The kiwi has been bolstered by last month’s rate hike by the Reserve Bank of New Zealand, with another hike likely to happen this week. Policymakers are trying to get ahead of rising consumer prices, with two-year inflation expectations coming in at 2.96% this quarter – the highest since Q2 2011.
Assuming such a hawkish outlook for the RBNZ, the kiwi should remain well-supported going into 2022.
With NZDUSD testing the 0.70 level for support at the start of this week, kiwi bulls will be hoping that this psychologically-important level can provide the base to launch this currency pair onto another cycle high above 0.720.
However, key resistance levels stand in the way, including the 50-day and 200-day simple moving averages.
Given that this week’s widely-anticipated hike has been priced in, hence it might take an even more hawkish move, such as a 50-basis point hike as opposed to the usual 25bps, for NZDUSD to really punch higher.
Alternatively, should the central bank signal a more aggressive policy tightening cycle over the coming months, that could further encourage kiwi bulls.
US dollar still dominates FX space
Of course, the USD side of the equation is set to have a major say on how this currency pair fares over the near-term, with several key announcements due to arrive before Thanksgiving Day.
US President Joe Biden is expected to announce his pick for Fed Chair sometime before Thursday, choosing from either incumbent Jerome Powell or Fed Governor Lael Brainard. The latter is seen to be even more dovish than Powell, hence her nomination could trigger some short-lived declines in the greenback.
Overall, there isn’t likely to be any wild swings in FX markets should Brainard be unveiled as Biden’s pick. This is because both Brainard and Powell are seen to have similar dovish biases when it comes to the Fed’s policy outlook.
The US dollar is also set to react to the slew of economic data due to be released on Thanksgiving Eve, including the Fed’s preferred gauge for inflation. The PCE deflator for October is expected to post higher readings on the month-on-month, year-on-year, and even core prints than in September.
Should those figures exceed market expectations, that might further stoke concerns that inflationary pressures in the world’s largest economy would force the Fed’s hand, no matter who’s Chair in 2022, into hiking US interest rates sooner than expected.
Such a narrative could see the US dollar climbing higher and exerting more downward pressure on the rest of the FX universe, including on the kiwi.
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