28thFebruary 2024Wednesday ThisWednesday, the financial calendar...

28^thFebruary 2024

Wednesday

ThisWednesday, the financial calendar is marked by significant announcements fromthree major economies. Australia is set to unveil its year-over-year ConsumerPrice Index (CPI), a key indicator of inflationary pressures within theeconomy. In parallel, New Zealand will disclose its Official Cash Rate, acritical decision that will provide insights into the central bank's monetarypolicy stance. Meanwhile, the United States will release its preliminaryquarterly Gross Domestic Product (GDP) figures, offering a snapshot of economicgrowth and health. These releases are poised to capture the attention ofinvestors and policymakers worldwide, given their potential implications forglobal financial markets.

AUD – CPI y/y

This measuretracks the monthly change in consumer prices for goods and services, a keyindicator of inflation that significantly influences overall economicconditions. Released approximately 25 days following the end of each month, itreflects the average price changes of a diverse set of products and serviceswhen compared to their previous assessments. Given inflation's critical role incurrency valuation, increases in consumer prices prompt central banks to adjustinterest rates in line with their mandate to manage inflation.

The monthlyConsumer Price Index (CPI) indicator in Australia had increased by 3.4% in theyear to December 2023, down from 4.3% in November and below market forecasts of3.7%. It marked the third consecutive month of moderation in annual inflation,with the latest reading being the lowest since November 2021, amid a slowdownin food prices (4.0% vs 4.6% in November) and housing (5.2% vs 6.6%),particularly electricity, gas, and other household fuels. Additionally, thecost had slowed for health (4.7% vs 5.2%), while transport inflation remainedsteady (at 3.6%) amid faster rises in automotive fuel. At the same time, priceshad fallen for recreation and culture (-2.4% vs 1.2%), furnishings, householdequipment & services (-0.3% vs -0.3%), and clothing and footwear (-0.8% vs-0.9%). The monthly CPI indicator, excluding volatile items and travel, hadrisen by 4.2% in December, down from a 4.8% gain in November. Inflation wasoutside the RBA's target range of 2-3%.

TL;DR

	Category	Annual Change to December 2023	Comparison to November 2023
1	Overall CPI	+3.4%	Down from +4.3%
2	Food Prices	+4.0%	Down from +4.6%
3	Housing (incl. utilities)	+5.2%	Down from +6.6%
4	Health	+4.7%	Down from +5.2%
5	Transport	Steady at +3.6%	Same as November
6	Recreation and Culture	-2.4%	Down from +1.2%
7	Furnishings, Household Equipment & Services	-0.3%	Steady at -0.3%
8	Clothing and Footwear	-0.8%	Slightly better than -0.9%
9	CPI Excluding Volatiles	+4.2%	Down from +4.8%

The forecast for the CPI y/ysuggests a modest rise to 3.5% from the earlier figure of 3.4%.

The upcomingannouncement for the CPI y/y is set to be released at 12:30 AM GMT onWednesday the 28^th.

The last time, AustralianCPI y/y was announced on the 31^st of January, 2024. You may findthe market reaction chart (AUDNZD M5) below:

NZD - Official Cash Rate

This measurereflects the interest rate at which banks lend balances maintained at theReserve Bank of New Zealand (RBNZ) to other banks overnight, with decisions onthe rate made seven times annually. Although the rate decision often getsanticipated by the market, its significance is generally eclipsed by the RBNZRate Statement, which offers insights into future monetary policy. Short-terminterest rates are crucial for currency valuation, with traders primarilyanalyzing various indicators to forecast potential rate adjustments. The RBNZGovernor, in consultation with senior bank staff and external advisors,determines the setting of this rate.

During itsNovember meeting, the Reserve Bank of New Zealand had kept its official cashrate (OCR) unchanged at 5.5%, maintaining the rate pause for the fourthconsecutive meeting and aligning with market expectations. The board hadremained confident that the prevailing OCR level was restrictive enough to curbdemand. Despite this, concerns were raised over persistent excess demand andcost pressures amidst high core inflation. The committee had concurred thatinterest rates would need to remain at a restrictive level for an extendedperiod to return inflation to the target range of 1 to 3% and to supportsustainable employment. While predicting a peak cash rate of 5.7%, policymakershad indicated the need to await further data to gauge the pace and magnitude ofthe reduction in domestic capacity pressures. The RBNZ had acknowledged aslowdown in parts of the economy, yet noted a smaller decline in total demandgrowth than had been anticipated earlier in the year. Meanwhile, members hadconsidered that monetary policy was conducive to sustaining house prices.

TL;DR

	Parameter	Details
1	Event	Reserve Bank of New Zealand November meeting
2	Decision	Official cash rate (OCR) unchanged at 5.5%
3	Consecutive Rate Pauses	4th consecutive meeting
4	Market Expectation	Aligned with expectations
5	Board's Stance	Confident that current OCR is restrictive enough to curb demand
6	Concerns	Persistent excess demand and cost pressures amidst high core inflation
7	Future Outlook	Interest rates to remain at a restrictive level for an extended period
8	Inflation Target Range	1 to 3%
9	Sustainable Employment	Support aimed
10	Peak Cash Rate Prediction	5.7%
11	Data Monitoring	Awaiting further data to assess reduction in domestic capacity pressures
12	Economic Observation	Slowdown in parts of the economy, with total demand growth decline less than anticipated earlier
13	Monetary Policy Impact	Considered conducive to sustaining house prices

The projection for the Official CashRate suggests it will hold steady, matching the prior rate of 5.5%.

The decision on the Official Cash Rateis scheduled to be announced at 1:00 AM GMT on Wednesday the 28^th.

The last time,the New Zealand Official Cash Rate was announced on the 29^thof November, 2023. You may find the market reaction chart (NZDJPY M5) below:

USD - Prelim GDP q/q

This indicatorrepresents the annualized change in the total value of all goods and servicesproduced by the economy, disclosed quarterly approximately 60 days followingthe quarter's conclusion. Although the data is quarter-over-quarter, it ispresented in an annualized format by multiplying the quarterly change by four.The 'Previous' value corresponds to the 'Actual' figure from the Advancerelease, leading to seemingly disconnected 'History' data. The GDP data is releasedin three stages—Advance, Preliminary, and Final—spaced a month apart, with theAdvance release typically having the greatest market impact. As the mostcomprehensive measure of economic activity, it serves as the primary indicatorof the economy's health and is also referred to as the GDP Second Release.

In the fourthquarter of 2023, the United States economy experienced a robust expansion, withan annualized growth rate of 3.3%, significantly surpassing the anticipated 2%increase and following a 4.9% growth in the third quarter, as per the advanceestimate. Despite a deceleration in consumer spending to 2.8% from 3.1% in theprevious quarter, with a notable slowdown in goods consumption to 3.8% from4.9%, the services sector saw a marginal uptick in growth to 2.4% from 2.2%,propelled by enhanced activity in food services, accommodations, andhealthcare. The contribution of private inventories to the overall growthdiminished to 0.07 percentage points, down from 1.27 percentage points in thethird quarter, while government expenditure grew at a reduced rate of 3.3%compared to 5.8% previously. In contrast, exports experienced an accelerationto 6.3% from 5.4%, and the increase in imports moderated to 1.9% from 4.2%.Delving deeper, non-residential investment witnessed a more substantial rise of1.9% versus 1.4%, buoyed by a rebound in equipment investment to 1% from aprevious decline of 4.4%, and an advancement in intellectual property productsinvestment to 2.1% from 1.8%, although investment in structures saw a temperingto 3.2% from 11.2%. Meanwhile, residential investment maintained its growthtrajectory, albeit at a diminished pace. For the entirety of 2023, the USeconomy expanded by 2.5%, a slight improvement over the 1.9% growth observed in2022 and marginally below the Federal Reserve's forecast of 2.6%.

TL;DR

	Parameter	Q4 2023	Comparison/Notes
1	Annualized Growth Rate	3.3%	Surpassed the anticipated 2% increase, following a 4.9% growth in Q3
2	Consumer Spending	2.8%	Decelerated from 3.1% in the previous quarter
3	Goods Consumption	3.8%	Slowed down from 4.9%
4	Services Sector Growth	2.4%	Marginal uptick from 2.2%, driven by food services, accommodations, and healthcare
5	Private Inventories Contribution	0.07 percentage points	Decreased from 1.27 percentage points in Q3
6	Government Expenditure	3.3%	Grew at a reduced rate compared to 5.8% in the previous quarter
7	Exports	6.3%	Accelerated from 5.4%
8	Imports	1.9%	Increase moderated from 4.2%
9	Non-Residential Investment	1.9%	Rose from 1.4%, with equipment investment rebounding to 1% from -4.4%
10	Investment in Structures	3.2%	Decreased from 11.2%
11	Intellectual Property Products Investment	2.1%	Increased from 1.8%
12	Residential Investment	Maintained growth	Albeit at a diminished pace
13	Annual Growth (2023)	2.5%	Improved from 1.9% in 2022, slightly below the Fed's forecast of 2.6%

The preliminaryforecast for the Preliminary GDP q/q is projected at 3.3%.

The upcoming PreliminaryGDP q/q is scheduled for release at 1:30 PM GMT on Wednesday the 28^th.

The last time,the US Preliminary GDP q/q was announced on the 29^th of November,2023. You may find the market reaction chart (USDJPY M5) below: