Although the week carries typically significant event risks with Australian Consumer Price Index and an interest rate decision from the Reserve Bank of New Zealand, their implications are substantially limited as overall trajectory in monetary policy in both antipodean countries is well known. We reckon this opens the door for continued consolidation below the recent top in price action.
[B]Trading Tip[/B] – Remaining event risk for Australia and New Zealand concerns interest rates, with Aussie CPI and the RBNZ rate decision released on consecutive days. Importantly, both banks have been established as on hold for the time being. Australia is just beginning to see the fruits of monetary tightening as the economy slows from its break-neck expansion of nearly 2 consecutive decades. Rising oil prices will keep upward pressure on price levels for New Zealand and a rate cut is highly unlikely. That said, the general weight of these releases must not be ignored. Conservative traders intent on following a range-bound strategy may opt to wait until after tomorrow’s RBNZ rate decision to reassess the trade and see if conditions are still favorable.
[B]Event Risk for Australia and New Zealand[/B]
[B]Australia[/B] – Following the release of Q1 PPI to start the week, CPI figures will clear the docket for Australia. The reading surpassed expectations, suggesting easing growth has yet to exert any downward pressure on the price level. The RBA noted early in the week that they expect consumer prices to remain “relatively high” in the near term. That said, a rate hike is effectively out of the question
[B]New Zealand[/B] –With today’s Credit Card Spending release largely insignificant, the most important item on the calendar is easily tomorrow’s rate decision. The likelihood of a change in policy is virtually non-existent, and traders will be looking at Governor Alan Bollard’s rhetoric to see how the bank will balance substantial upside inflation risks with slowing growth.
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