The Week Ahead

During the week ahead the market is likely to look towards a number of key market themes and events which have the potential to dictate financial market moves.

The economic calendar is jammed packed with central bank and jobs action this week as the Bank of Canada and Bank of Japan decide on rates while the US reveal the latest payrolls data.

US non-farm payrolls

The US economy unexpectedly created 517,00 jobs in January of 2023, which was the most since July, setting up a positive tone for the US economy on the back of the report.

There were also big revisions, with employment gains in November and December combined being 71,000 higher than previously reported. Some estimates I am seeing are for a minus number in February which could be shocking.

Friday’s payrolls report could help answer this question if it shows that the US labour market remained hot in February. Based on this report the focus is likely to be how many more rate hikes are coming.

Expectations are low for figure of 517,000 again, which could even be revised, but a February print of around 200,000 would still underline the strength of the US labour market.

US wages will also be a major focus as will the unemployment rate, which fell to 3.4% in January, its lowest level since 1969. The Fed have plenty of scope to hike with unemployment this low.

Bank of Japan interest rate decision

Interesting time at the BoJ as Kazuo Ueda set to replace Haruhiko Kuroda as governor of the Bank of Japan. Kuroda oversaw the biggest monetary experiment ever in QE.

The Bank of Japan (BoJ) maintained its key short-term interest rate at -0.1% and that for 10-year bond yields around 0% during its January meeting by a unanimous vote.

The central bank also kept its 0.5% cap for bond buying, defying market speculation, and signalling that policymakers are not seeking a looser grip on bond yields after the unexpected tweak of the yield curve control range in December.

This week’s meeting will be Kuroda’s last as governor, raising the possibility that he might seek to lay the groundwork for a shift in monetary policy under his successor in the coming months.  

Most of the focus will be on next month’s BoJ meeting and what the new Governor of Japan is actually going to do.