The week ahead will see a continuation in the central bank meetings. The lineup includes the Reserve Bank of Australia, the RBNZ and the Bank of England. No changes are expected from either of the central banks at this week’s meeting but investors will be watching for the forward guidance from the respective central banks.
On the economic front, data this week will include trade balance numbers from Australia and Canada. This could potentially set the expectations for the GDP data going ahead. The UK’s manufacturing production numbers will also be coming out later in the week on Friday followed by the goods trade balance figures.
On Friday, Canada will be reporting on its monthly job figures. This will gain more significance as investors will be looking to see if Canada’s labor market has managed to maintain the bullish momentum seen in December. December’s labor market data was one of the key aspects that drove the BoC to hike rates earlier in January this year.
Besides Canada, New Zealand will also be reporting on its quarterly employment figures this week. Here’s a quick recap into this week’s economic calendar for the currency markets.
BoE to buy more time as inflation could ease
The Bank of England’s monetary policy meeting this Thursday is unlikely to offer any fresh clues for the Market. Given the recent slower pace of increase in inflation which saw consumer prices rising 3.0% against the previous increase the month before, the BoE is expected to hold rates steady at 0.5%.
The Bank of England had hiked interest rates in November last year. Based on the recent improvements in the UK’s GDP which came out better than expected underlining the resilient economy, BoE officials are likely to maintain the rates steady at this week’s event.
Currently the expectations for a BoE rate hike shows that the markets expect the next rate hike to come during the second half of the year. Inflation is expected to ease, but the seasonal March effects where inflation is known to rise could keep the BoE officials in a tight spot.
RBNZ expected to keep rates unchanged
This week’s RBNZ monetary policy meeting is unlikely to hold any new surprises. The central bank is expected to maintain the official cash rate at 1.75%. This would mark a ninth consecutive month that the RBNZ has held interest rates steady. The forward guidance from the RBNZ will be closely watched.
The basis for keeping interest rates and probably the forward guidance unchanged comes from the recent quarterly inflation data. New Zealand’s quarterly inflation data showed that consumer prices rose at a pace of 0.1%. This was weaker than the forecasts of 0.4% and erased most of the gains from the third quarter of 2017 where New Zealand’s CPI advanced 0.5%.
Back then, the third quarter CPI stoked expectations that the RBNZ could move forward its rate hike plans. However, with inflation once again falling in the fourth quarter, the central bank could be expected to remain on the sidelines.
Canada monthly labor market data
Investors will be particularly interested in the monthly Labor Market data from Canada this week. The report will cover the month of January and could shed light on whether the labor market is indeed tightening or whether the December data was just an outlier.
In December, Canada’s unemployment rate fell to 5.7% against expectations of a steady print of 6.0%. The number of jobs added during the month rose to 78.6k beating expectations of 1.8k.
Overall, the December jobless data was one of the reasons that prompted the Bank of Canada to hike rates in January. If January’s labor market data points to a steady trend in the labor market, this could potentially boost prospects for the BoC to prepare the markets for another rate hike.
However, any signs that the December data was an outlier could mean that the BoC will have to wait longer before it pushes ahead with more rate hikes.
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