The Forex Week Ahead: March 6-10th
The Forex Week Ahead USD It’s unlikely that the only thing of note on the US calendar next week will actually matter much to the Fed. It would take a really big downside to nonfarm payrolls and/or wage growth on Friday to impact the debate on whether to hike on March 15th or opt to buy more time. ADP may provide a clue two days before but we always caution on its hit and miss ability to track nonfarm. Strong numbers might solidify a March hike, while even just 100-150k new jobs and north of 2% wage growth would likely keep a hike in March on track all else equal by way of Fed thinking. Markets are largely priced for a hike this month and very suddenly at that, but are doing so by leaving the full year’s expected number of hikes largely unchanged at a little more than two being fully priced in for the year. Factory orders during January arrive Monday and are expected to follow the already released durables report higher with the only new information being the other half of the report that is comprised of nondurable goods. While usually of little consequence to markets, the Fed’s quarterly financial accounts of the US economy will offer headlines on changes in household net worth, equity wealth, and indebtedness in Q4 on Thursday.
EUR The week’s highlight may be Thursday’s meeting and policy decision at the European Central Bank. No policy change is expected at this one and instead the focus will be upon updated forecasts and any modest potential change in the policy bias. Other developments during the week will be focused upon data updates that will inform Q1 growth tracking. Industrial production is on tap in France, Germany and Spain. German factory orders and Spanish retail sales will complement the picture
GBP A number of U.K. economic reports on housing, manufacturing and trade will be closely watched but may ultimately take a backseat to any news or headlines on the Brexit and specifically, on the timing of when the government will trigger Article 50 of the Lisbon Treaty.
JPY A light Japanese economic calendar will feature a revision to Q4 GDP but should ultimately take a backseat to broader moves in bonds. Any sustained move higher in U.S. yields should keep USDJPY biased higher.
AUD The Reserve Bank of Australia issues a policy decision on Tuesday. No one within consensus expects a policy change with the cash target rate remaining at 1.5%. After the economy rebounded smartly with 1.1% QoQ non-annualized growth in Q4 from a half point contraction in Q3, the central bank might leave well enough alone for now notwithstanding strength in the Aussie this year and risks to global trade policy.
CAD Wages, exports and housing are three of the main variables of interest to the Bank of Canada and key sectors of the Canadian economy. Soft wage gains, export weakness, and a housing market at potentially fragile peaks of activity have been among the interconnected reasons for a generally cautious set of messages from the BoC. Updates on each of these will get most of the attention by way of domestic influences upon local markets next week largely because they will incrementally inform the outlook for monetary policy. Canada releases the latest Labour Force Survey of employment conditions next Friday for the month of February. Before Friday’s jobs data will come trade on Tuesday. Canada’s export growth has been flashing warning signs since before the US election.