European Central Bank and Bank of Canada Statements to be Pivotal this Coming Trading Week
The upcoming trading week could be off to a quiet start compared to the previous one, as most of the major market catalysts are concentrated towards the end of the week. The biggest one of these might be the Reserve Bank of New Zealand interest rate decision, which could contain a few cautious remarks but still have no changes to monetary policy.
Data from New Zealand has been relatively stable, as the economy has seen improvements in hiring and spending. The country’s dairy sector, which accounts for much of its export revenues, has also seen a strong pickup in prices and demand, as seen in the latest dairy auctions. However, the RBNZ has been said to make a few adjustments in its housing sector credit, which led a few speculators to think that the central bank is gearing up to ease monetary policy.
Other top-tier events lined up include the release of Australia’s and Canada’s jobs reports. Australia has seen a sharp downturn in hiring in their previous employment release, and this has been one of the main reasons why the Reserve Bank of Australia cut interest rates in their February meeting. However, the Australian central bank decided to stand pat in their announcement last week, citing that they’d rather wait for the impact of their recent easing to kick in before making more moves. Weaker than expected hiring data could renew talks of another RBA rate cut, which might weigh on the Australian dollar.
As for Canada, a pickup in hiring might be seen now that oil price trends seem to have recovered so far this year. The Bank of Canada also refrained from easing monetary policy further in their statement last week and indicated that they’re no longer looking to cut rates further as the economy has shown considerable improvements lately.
The US retail sales report due Thursday might also be a market-mover, as the report could show whether or not the strong gains in hiring are translating to better spending figures. If so, market watchers could resume speculating about a Fed rate hike in June, although many would rather wait for the next FOMC statement to see if there are any changes to the central bank’s forward guidance.
Earlier in the week, traders could focus on news reports from Asia, particularly from China and Japan. For China, inflation reports are up for release and another downturn in price levels is eyed. Bear in mind though that the People’s Bank of China just recently surprised with an interest rate cut, and that a sharp drop in price levels might mean that another round of easing is likely to take place.
Chinese industrial production and retail sales figures will follow on Wednesday, and traders are keen to see how the world’s second largest economy is faring. This is because a few central banks from the emerging economies have started cutting interest rates, which means that policymakers are worried that another global economic slowdown might happen.
As for Japan, the current account balance and final GDP reading are up for release on Monday. Weak data could remind traders that the Bank of Japan is being urged to ease monetary policy further, as inflation and spending reports have consistently tumbled in the past months. Core machinery orders, PPI, and tertiary industry activity data are also lined up from Japan throughout the week.
Another market factor to keep in mind for the upcoming trading week is that Monday marks the official start of the ECB’s quantitative easing program, which suggests that the euro could be in for more weakness as the central bank pumps money into the economy for the next 18 months.