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Focus on RBNZ, Bank of Canada Interest Rate Decisions

Canada and New Zealand are expected to announce interest rate decisions on Wednesday, July 13.

The two countries and their national currencies, the CAD and NZD, are relatively influential in the world economy. Canada is a member of the G7 and New Zealand is one of the richest OECD countries in the world.

Bank of Canada (BoC) – headline inflation at 7.7%

The BoC is expected to raise its current rate forecast to 2.25% from 1.5%. The hawkish expectations came as the central bank struggled to bring down headline inflation to its target level of 2% from 7.7%.

If the rate hike comes as expected, the CAD could see support, but the risk of a recession in Canada could increase. One of Canada's biggest trading partners, the US, is already on the verge of a technical recession – although North American employment figures remain resilient.

Conflicting and complex economic forces are part of the unusual scenario created by COVID-19 combined with the impact of geopolitical events on the global economy such as the conflict in Ukraine.

Reserve Bank of New Zealand (RBNZ) – headline inflation at 6.9%

The RBNZ is expected to raise its rate forecast to 2.5 percent from 2 percent on Wednesday. New Zealand's economy is also showing some signs of weakness after contracting 0.2 percent in the first quarter due to the impact of COVID-19.

If there is a surprise in the decisions of the BoC and RBNZ, there may be a move in the CAD and NZD currency pairs.

In related trade news, Bank of England (BoE) Governor Bailey delivers a speech later in the day. The UK economy faces the highest inflation rate among the G7 countries and the BoE is under significant pressure to contain it. Today's speech could provide clues on the BoE's next move.

Several mega-cap financial firms will release earnings reports this week, including JP Morgan Chase on July 14 and Citigroup on July 15.

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This material does not contain, and should not be construed as, investment advice, investment recommendation, offer or solicitation of any transaction in any financial instrument. Please note that such trading analysis is not a reliable indicator of current or future performance as circumstances may change over time. Before making any investment decisions, you should seek advice from an independent financial advisor to ensure you understand the risks.