The Week Ahead: The Fed, the BoJ, the BoE, and the RBA in Action

The US Dollar

On Tuesday, US housing sector data will draw investor interest. Economists consider the housing sector a litmus test of the US economy. A slump in building permits and housing starts may influence bets on an H1 2024 Fed rate cut.

However, the Fed interest rate decision, press conference, and economic projections will have more impact on Wednesday. The markets expect the Fed to leave rates at 5.5% in March. A hold would turn the focus to the economic projections and press conference. The outlook on inflation, the economy, and interest rates will move the dial.

On Thursday, weekly jobless claims, Philly Fed Manufacturing, and private sector PMIs will draw investor interest. Barring a spike in jobless claims, the Services PMI will likely impact buyer demand for the dollar more.

Beyond the numbers, investors must also monitor FOMC member commentary.

The EUR

On Monday, finalized inflation numbers for the Eurozone will set the tone for the EUR/USD. Downward revisions to preliminary numbers could support bets on a June ECB rate cut. Eurozone trade data also need consideration amidst the threat of a Eurozone recession.

Q4 wage data for the Eurozone will warrant investor attention on Tuesday. Wage growth remains a bugbear for the ECB. A pickup in wage growth could influence the ECB rate path. Other stats include German consumer sentiment numbers. However, these will likely play second fiddle to the wage growth numbers.

On Thursday, preliminary private sector PMIs for France, Germany, and the Eurozone will be in focus. The services sector PMIs will have more impact, with services being the main contributor to inflation.

The German economy will be in focus again on Friday. German Ifo Business Climate numbers wrap up an important week.

Beyond the numbers, investors must track ECB member commentary.

The Pound

On Wednesday, UK inflation numbers for February will influence buyer demand for the Pound. Sticky inflation figures could signal a higher-for-longer Bank of England rate path.

Preliminary private sector PMIs for the UK will kickstart an important Thursday session. The focus will be on the Services PMI, accounting for over 70% of the UK economy.

Beyond the headline PMI, investors must consider employment, new orders, and prices. An upward trend in wages and output prices could influence the BoE rate path.

However, later in the Thursday session, the Bank of England Interest rate decision and MPC Meeting Minutes will have more impact. The markets expect the BoE to leave interest rates at 5.25%. A hold would shift the focus to the vote count and Meeting Minutes.

On Friday, UK retail sales numbers for February will end a busy week. Upward trends in consumer spending could fuel demand-driven inflation and delay the timeline for a BoE rate cut.

Away from the economic data, Bank of England commentary also needs monitoring.

The Loonie

On Tuesday, inflation numbers from Canada will impact the buyer demand for the Loonie. Softer-than-expected numbers may raise bets on a Bank of Canada interest rate cut.

However, retail sales also warrant consideration on Friday. Weaker-than-forecast numbers could further support bets on a BoC interest rate cut.

Other stats include RMPI and New Housing Price Index numbers. However, these will likely play second fiddle to the inflation and retail sales data.

The Australian Dollar

On Tuesday, the RBA interest rate decision, rate statement, and press conference will influence trends for the  Aussie dollar. In February, the RBA left an interest rate hike on the table. With the markets expecting the RBA to leave the cash rate at 4.35%, the press conference will have more impact. Views on inflation, the economic outlook, and interest rate cuts need consideration.

Employment numbers on Thursday also warrant investor attention. Tighter labor market conditions could support wage growth and fuel consumer spending. Higher consumer spending trends could pressure the RBA to hike rates to dampen demand-driven inflation.

On Friday, the RBA will be in the spotlight again. The RBA Financial Stability Report will draw investor interest.

The Kiwi Dollar

Q4 GDP and consumer sentiment numbers for New Zealand will impact the Kiwi dollar. A pickup in consumer sentiment could fuel consumer spending and demand-driven inflation.

However, a contraction in the New Zealand economy could force the RBNZ to leave the cash rate steady over the near term.

The Japanese Yen

On Tuesday, the heavily anticipated Bank of Japan monetary policy decision will influence the Japanese Yen. An exit from negative rates would drive buyer demand for the Yen. However, forward guidance on monetary policy would also need consideration.

Trade data and private sector PMIs from Japan will garner investor interest on Thursday ahead of inflation numbers on Friday.

The impact of the numbers on the Yen will likely hinge on the monetary policy decision and forward guidance. While considering a pivot from negative rates, the BoJ remains concerned about the economy. Nonetheless, the services sector is a focal point, with the BoJ wanting services to fuel demand-driven inflation.

Out of China

Industrial production, retail sales, unemployment, and fixed asset investment numbers will affect market risk sentiment on Monday.

Beijing withheld fiscal stimulus measures to bolster the economy during the National People’s Congress. We expect increasing sensitivity to the numbers from China. A pickup in industrial production and domestic consumer demand could be a boon for riskier assets and commodity currencies.

On Wednesday, the PBoC will be under the spotlight after leaving the one-year MLF rate unchanged. The PBoC will set Loan Prime Rates on Wednesday.

A cut to Loan Prime Rates could boost demand for riskier assets before the Fed interest rate decision.