Weekly Market Outlook: Employment reports and Meeting minutes
Fed and ECB meeting minutes on tap this week
The economic calendar for the week ahead marks the employment report coming out of Australia and UK. Central bank speeches this week will include talks from the Bank of Canada governor, Poloz and the ECB President Mario Draghi. The RBA’s Lowe will also be speaking this week.
From the Fed, Williams should hold a speech followed by some other members including Clarida, Bullard, and Quarles.
Elsewhere, in the Eurozone, the monthly flash PMI manufacturing and services activity reports will be coming out. The data covers February, and the flash readings will be of interest amid a slowdown in the Eurozone’s economy.
The ECB, RBA and the Fed will be releasing their respective monetary policy meeting minutes this week as well.
Here’s a quick recap of what’s to come in the currency markets this week.
Jobs report – Australia and the UK
The employment report from Australia and the UK will be coming out this week. Both reports will gain a lot of attention.
For Australia, the week ahead will see the wage price index data for the fourth quarter coming out beside the monthly labor market data. Australia’s unemployment rate fell to 5.0% last month while the economy added a substantial number of jobs. However, the question remains on whether the robust hiring has translated to higher wages.
The RBA has been on the sidelines for the past many years as it patiently waits for inflation to edge closer to the inflation target rate. The wage price index data could potentially offer some clues in light of the recent weakness in the energy prices.
Economists forecast that the wage price index advanced 0.6% in the three months ending December. In the previous quarter, the wage price index advanced at a pace of 0.6%.
The unemployment rate is expected to remain steady at 5.0% while the monthly employment change is expected to show 15.2k jobs being added during the month.
The UK’s jobs report will be another exciting report to watch. Amid the backdrop of the recent decline in consumer prices, wages are likely to rise when adjusted for inflation. The UK’s labor market has also been steading expanding with the unemployment rate staying near historic lows.
A higher than expected wages data could begin to build the case for the BoE officials to prepare the markets for another rate hike.
Meeting minutes from the RBA, Fed and the ECB
The monetary policy meeting minutes will be released this week by the high three respective central banks. The minutes cover the most recent monetary policy meetings that were held. No changes were made to interest rates from all the three central banks.
The Fed’s minutes are something to watch as investors wait to see the inside deliberations on monetary policy. The Fed should keep interest rates on hold at least into the first quarter as it waits for recent economic data.
The slower pace of increase in inflation has partly taken the pressure off the Fed to hike interest rates which according to officials is near the neutral rate. Still, the minutes could give further information on the Fed’s thinking of the short term rates.
The ECB’s minutes are not likely to provide and surprises for the markets. However, given the recent decline in both growth and inflation figures, there is a chance that the meeting minutes could be dovish. The ECB had, in its December meeting minutes revealed that the governing council discussed relaunching the TLTRO program.
Questions remain as to whether this topic was once again discussed. The ECB’s minutes will also show insights into the ECB’s plans looking ahead amid the QE program coming to an end.
Eurozone – Flash PMI’s and inflation report
Data from the Eurozone this week will see the release of the flash manufacturing and services PMI reports coming out. The recent decline in business activity has been a concern for both investors and ECB officials.
Another month of weaker reading on the business activity could potentially push the ECB officials to look at additional easing measures for the short term. The final inflation report for January will be coming out this week as well. No changes should arise as inflation could remain weak with headline CPI at 1.6% and core inflation rate at 1.1% on the year.
The ECB President Mario Draghi will be speaking on Friday following the release of the flash PMI’s and inflation reports.