The Week Ahead – Fed Chair Powell and Central Banks in the Spotlight

On the Macro

It’s a busy week ahead on the economic calendar, with the Fed back in the spotlight as the markets and Fed speakers see-saw between slow and steady and aggressive policy moves to bring inflation under control.

For the Dollar:

It is another big week ahead for the global financial markets, with the US labor market and Fed Chair Powell in the spotlight.

On the economic data front, ADP nonfarm payrolls and JOLTs job openings will draw interest on Wednesday. While the ADP numbers influence, quit rates from the JOLTs job openings will give the markets a sense of how the labor market feels about labor market conditions.

On Friday, the market focus will shift to the February Jobs Report. Another jump in nonfarm payrolls and an unexpected fall in unemployment would spook investors. Economists forecast the US unemployment rate to rise from 3.4% to 3.5%.

With the US labor market in focus, Fed Chair Powell will give testimony on Tuesday and Wednesday. A shift in focus from his post-FOMC policy decision speech to a more hawkish posture would test the appetite for riskier assets in the first half of the week.

The markets are hoping for a 25-basis point rate hike in March, while the hawks begin pushing the idea of a 50-basis point move.

For the EUR:

It’s a quieter week but another significant week for the EUR.

The German economy will be in the spotlight in the first half of the week. On Tuesday, factory orders will draw interest ahead of retail sales and industrial production numbers on Wednesday.

On Wednesday, euro area GDP numbers for Q4 are also out. However, the finalized numbers should limit the impact on the EUR and the European equity markets.

Other stats include euro area retail sales (Mon) and finalized German inflation figures (Fri). Barring a marked deviation from forecasts, these should have a limited impact on the EUR and the European markets.

For the Pound:

It’s a busy week ahead for the pound.

However, investors will have to wait until Friday for the key stats of the week. GDP, industrial and manufacturing production, and trade data will be in focus.

After the better-than-expected private sector PMI numbers for February, the markets will be eyeing better-than-forecasted numbers to deliver Pound support.

For the Loonie:

It’s a big week ahead on the economic calendar for the Loonie. On Wednesday, trade data will be in focus ahead of employment numbers on Friday. While both sets of numbers will move the dial, the BoC interest rate decision will be the main event. An interest rate hike would catch the markets by surprise. Economists expect the BoC to stand pat this year.

Out of Asia

For the Aussie Dollar:

It’s also a big week ahead for the Aussie Dollar. Retail sales and trade data will draw interest on Tuesday. However, the RBA interest rate decision will be the key driver.

The RBA has remained steadfast in its commitment to bring inflation to target. Economists forecast a 25-basis point interest rate hike on Tuesday, with a cash rate target of 3.85% in Q2. Any deviation from the script will move the dial.

On Wednesday, an RBA Governor Philip Lowe speech will also need consideration.

For the Kiwi Dollar:

It’s a quiet week ahead for the Kiwi Dollar.

Electronic card retail sales figures will be in focus on Thursday ahead of business PMI numbers on Friday. The numbers need to impress to shift concern about lifting rates too far and too quickly.

Last week, RBNZ Governor Orr spoke of the dangers of lifting rates too quickly and going too far.

For the Japanese Yen:

It is a busier week ahead for the Japanese Yen. On Thursday, Q4 GDP numbers will be in focus ahead of household spending figures on Friday. A pickup in economic activity and a rebound in spending would be Yen positive.

However, recent messaging from the incoming Bank of Japan Governor Kazuo Ueda suggests a status quo on the policy front, which should limit the influence of the numbers on the Yen.

The Bank of Japan will also deliver its interest rate decision on Friday. There should be little to no impact on the USD/JPY pair, barring a shift to a more hawkish outlook.

Out of China

It is an important week ahead. Following the better-than-expected private sector PMI numbers for February, the markets will be sensitive to the stats.

On Tuesday, trade data for February will influence market risk sentiment ahead of inflation numbers on Thursday. An unexpected narrowing in the USD trade surplus and a hotter-than-expected CPI report would test the appetite for riskier assets.

Geo-Politics and Brexit

Russia and the war in Ukraine will remain the focal point along with Russia-China ties.

Updates on Iran’s nuclear program will also need monitoring following reports of Iran enriching uranium to near weapons grade.