NFP Report And Interest Rate Decisions Steal The Spotlight

In a week full of important economic data releases, the US Nonfarm Payrolls report and interest rate decisions coming from the Reserve Bank of Australia (RBA) and the Bank of Japan (BoJ) stand out from the crowd.

RBA Interest Rate Decision: One more hike?

On Tuesday March 7th, the RBA will announce its interest rate decision. Economists suggest that Australia’s central bank will likely increase its benchmark interest rate for the 10th consecutive time. Analysts at ANZ, Commonwealth Bank and Westpac forecast a 0.25% hike. The RBA raised borrowing costs to 3.35% in its February meeting. 

According to a Reuters report, “Australia's central bank, startled by the risk that inflation could prove stickier than previously thought, abandoned all thought of pausing at its February policy meeting and signalled more rate hikes would be needed in the months ahead."

Nonfarm Payrolls: Another surprise on the way?

The US Bureau of Labour Statistics (BLS) is expected to publish the February Nonfarm Payrolls figures on Friday. Some analysts forecast that 200,000 jobs were added to the US economy during February. Nonfarm Payrolls tend to surprise markets and trigger volatility.

According to the BLS January NFP report, 517,000 new jobs were created during the first month of the year, with the figure triggering a US dollar rally. Market analysts had forecast a 185,000 rise. A Morgan Stanley report suggests that if the February NFPs reach the 500k figure once again, the Federal Reserve may have to consider a 50 basis points rate hike in its next monetary policy meeting.

BoC Interest Rate Decision: Pausing hikes?

On March 8th, the Bank of Canada (BoC) governing board will convene to decide on interest rates. The BoC’s policymakers have signalled that they are prepared to pause rate hikes as the tight monetary policy takes effect in the country’s economy. Last week, Statistics Canada reported that the country’s economy didn’t grow at all in the fourth quarter of 2022 versus the previous quarter, thus bringing an end to five consecutive quarters of GDP growth.

Currently, the BoC’s benchmark rate stands at 4.5%. CIBC’s economists suggest that interest rates will stay at 4.5% throughout the year before being eased gradually in 2024.

BoJ To Decide on Rates

On March 10th, the BoJ's governing board will have its monthly meeting and is expected to announce its interest rate decision. Economists suggest that borrowing costs will remain unchanged. Bank of Japan (BOJ) board member Junko Nakagawa told reporters that the central bank must maintain its ultra-loose monetary policy for the time being, as the economy hasn’t achieved its 2% inflation target.

However, a Reuters survey showed that about half of Japanese firms believe that new leadership at the BoJ should revise its negative interest rate policies, while more than a quarter said its inflation target should be changed.

Eurozone GDP expands in Q4 2022?

On Wednesday, Eurostat will reveal the Eurozone’s GDP Q4 2022 GDP growth figure. Market experts forecast 0.1% growth on a quarterly basis and 1.9% on a year-to-year basis. Economists reiterate that mild weather conditions may have helped the euro bloc’s economy to grow.

The European Commission (EC) has revised its economic growth forecast for the Eurozone upwards to 0.9% in 2023 from 0.3% previously, projecting 2024 growth unchanged at 1.5%.

Eurozone retail sales in January

Investors will have the opportunity to scrutinise the eurozone’s retail sales report, due to be published on Monday by Eurostat. Market analysts forecast a 0.3% drop, on a monthly basis, and a 1.2% fall, on an annualised basis, in January.

Retail sales had slumped in December 2022, showing the weakness in consumer demand amid high inflation. According to a Eurostat report, the annualized Eurozone Harmonised Index of Consumer Prices (HICP) came in at 8.5% in February versus January’s 8.6%.

Japanese economy likely to have grown in Q4 2022

On March 8th, the Japanese Cabinet Office will release its Q4 2022 GDP report. Economists suggest that Japan’s GDP grew by 0.2%, on a quarterly basis, in the fourth quarter of 2022. The figure could mark the first quarterly growth since the April-June quarter of 2022.

Economists at Moody’s Analytics noted that “our baseline view is still for Japan to eke out moderate growth in 2023 as domestic demand improves, supported by the removal of COVID-19 restrictions, falling inflation, and the resumption of international travel. But GDP remains some way from pre-pandemic peak levels of output, and risks to the outlook are significant. Weak momentum abroad will weigh on exports.”

China CPI inflation in February

On March 9th, investors will have the opportunity to scrutinise the Chinese February CPI inflation report, published by the National Bureau of Statistics (NBS). The report is expected to show that inflation remained unchanged at 2.1% on an annualised basis, while economists suggest that inflation slowed down to 0.3% on a month-to-month basis.

Analysts at Moody’s Analytics had said in mid-February that “China’s reopening won’t be a silver bullet. Although 2023 is looking a lot more promising than what we had previously expected, the year is set to be bumpy; it will take time for households to truly shake the Covid-19 blues.”

UK GDP growth: Gaining momentum?

The Office for National Statistics (ONS) is expected to publish data regarding the UK’s GDP growth in January. Economists suggest that the economy expanded by 0.1% on a month-to-month basis.

The BoE’s Chief Economist Huw Pill told reporters that the British economy shows slightly more momentum than anticipated while pay growth also proves faster than the central bank’s forecast.

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