Market awaits RBNZ announcement and the start of the earnings season

This trading week is poised to be a significant one for Forex and share traders, with two key events dominating the market landscape. First, the Reserve Bank of New Zealand (RBNZ) will announce its latest monetary policy decision. Simultaneously, the Q3 earnings season kicks off, offering crucial insights into the financial health of companies around the world. Among the major companies releasing their earnings reports are big American companies like PepsiCo, Delta Air Lines, JPMorgan Chase & Co, Wells Fargo & Co, and BlackRock Inc. Let's delve deeper into these events.

RBNZ monetary policy: Economist expect the RBNZ to cut rates by half a percentage point on Wednesday 9th

In August, the Reserve Bank of New Zealand (RBNZ) surprised markets by cutting its benchmark interest rate by 25 basis points to 5.25%, marking the first reduction since March 2020. This move came as inflation showed signs of returning to the central bank’s target range of 1% to 3%. Consumer price inflation slowed to a three-year low, with the CPI rising just 0.4% in the quarter ending June, and annual inflation dropping from 4% to 3.3%, the lowest since mid-2021. The next set of inflation data, due on October 17, is expected to show a further slowdown to 2.3%, bringing inflation back within the RBNZ's target range for the first time since early 2021.

Looking ahead to the RBNZ’s next policy meeting on October 9, market expectations point to further rate cuts. Economists from all five of New Zealand’s largest banks anticipate that the RBNZ will lower the Official Cash Rate (OCR) to 4.75%, followed by another cut to 4.25% at the November 27 meeting. Westpac forecasts two consecutive 50-basis-point reductions in October and November, bringing the OCR down to 4.25% by the end of 2024, with more modest cuts expected in 2025, ending at 3.75% by mid-year. Kiwibank similarly anticipates 50-basis-point cuts in both October and November, noting that the economy remains in recession, unemployment is rising, and the RBNZ is cutting rates sooner than initially expected.

While inflationary pressures are easing and approaching the Reserve Bank of New Zealand's (RBNZ) target range, the New Zealand economy continues to face challenges. This has led many analysts to anticipate further aggressive interest rate cuts from the RBNZ in the near term to stimulate economic activity. Such monetary policy easing typically exerts downward pressure on the New Zealand dollar (NZD) and can influence other domestic financial markets.

This expectation of a rate cut is already reflected in recent currency movements. Over the past four days, the NZD/USD currency pair has depreciated by over 2.29% as traders increasingly position themselves for a more dovish RBNZ stance. Conversely, the US dollar (USD) has strengthened due to a combination of factors. The Federal Reserve has signaled a less aggressive approach to rate cuts compared to previous expectations, and escalating tensions in the Middle East have bolstered the USD's safe-haven appeal.

Daily NZD/USD Chart - Source: ActivTrader

Kicking off US earnings season: Key insights

PepsiCo Q3 earnings: Will they surprise Wall Street this time?

PepsiCo faced a challenging second quarter, with its North American operations encountering setbacks that impacted overall revenue. Product recalls and weakening demand in key categories led to a revenue miss, prompting the company to lower its full-year expectations. PepsiCo now anticipates organic revenue growth of approximately 4%, reflecting the increasing price sensitivity of consumers.

When? Pre-market on Tuesday 8th of October.

What to expect? EPS of $2.30 (after $2.28) / Revenue of $23.83 billion (after $22.50 billion).

Daily Pepsico Chart - Source: ActivTrader

Delta Air Lines: Did summer travel fuel a profit surge in Q3?

Analysts predicting a modest year-over-year revenue increase for the third quarter but a slight decline in profits. This upcoming earnings report will be the first since a major IT outage in July, forcing the airline to cancel a large number of flights, which might have led to $500 million in losses. Despite achieving record revenue in the previous quarter, Delta's net income fell short of expectations, declining by 30%. While the company has maintained its full-year adjusted earnings forecast of $6 to $7 per share, Delta Air Lines, like other airlines, contends with rising costs and increased competition, putting pressure on fares. This challenging environment casts uncertainty on the company's upcoming financial performance.

When? Pre-market on Thursday 10th of October.

What to expect? EPS of $2.36 (after $1.53) / Revenue of $16.66 billion (after $15.25 billion).

Daily Delta Air Lines - Source: ActivTrader

JPMorgan Chase: Can it maintain its earnings momentum in Q3?

JPMorgan Chase & Co. surpassed analysts' expectations for both profits and revenue in the second quarter, fueled by a remarkable 52% year-over-year surge in investment banking fees. This strong performance drove a 20% increase in total revenue, with equities trading revenue also climbing by an impressive 21%. The bank's earnings soared by 25% compared to the same period last year. However, a notable increase in provisions for credit losses suggests that JPMorgan anticipates potential headwinds for the US economy in the coming months, which might have had an impact on its financial situation in the 3rd quarter.

When? Pre-market on Friday 11th of October.

What to expect? EPS of $3.98 (after $6.12) / Revenue of $41.45 billion (after $50.20 billion).

Daily JPMorgan Chase & Co Chart - Source: ActivTrader

What to expect from Wells Fargo’s Q3 earnings?

Wells Fargo surpassed second-quarter earnings and revenue expectations despite a 9% drop in net interest income attributed to rising funding costs. This positive performance was driven by strength in other areas of the business, with the bank projecting continued growth in fee-based revenue to counterbalance the anticipated ongoing decline in net interest income.

When? Friday 11th of October.

What to expect? EPS of $1.34 (after $1.28) / Revenue of $20.69 billion (after $20.46 billion).

Daily Wells Fargo & Company Chart - Source: ActivTrader