7 March AtoZForex, Lagos – Interesting week ahead as we have rate decisions and high impact economic releases from many countries, with specific emphasis on the European Central Bank conference on Thursday. The regional central bank is now expected to announce the next plan of monetary policy measures, as Eurozone inflation continues to disappoint.
Last week recap: NFP, Crude oil rally and Aussie surge
The non-farm payroll change released on Friday showed hiring surged by 242k with a 30k net upward revision to the previous two months. The unemployment rate remained unchanged at 4.9%, mainly because a huge household survey jobs gain was swamped by a two tick increase in labour force participation. The only disappointment for the Fed was within average wages, which eased 0.1% on monthly bases to stand 2.2% on yearly. Also, the trade deficit widened in January on a 2.1% drop in exports.
Crude oil prices are now rallying, despite of the spike in US crude oil inventory as shown in the report last week, which depicted an adjusted annual rate of 10.374M from the preceding month at 3.502M. This surge is seen to be driven majorly by optimism over a potential deal betweenOPEC and non-OPEC countries to cap output levels, in a bid to avoid further oil glut. Russia, a major player in this deal has said that an international pact is close to being reached, with a final decision to be reached at a meeting this month. Into the new week, West Texas Intermediate (WTI) and BRENT are currently trading at 37.80 and 39.70 respectively.
The Australian dollar was one of the best performing currencies last week, after the Reserve Bank of Australia opted to keep rates on hold, also reporting positive trade balance figures and better than expected Gross Domestic Product (GDP). The country’s GDP showed a growth of 0.6% and an aggregate growth of 3.0% 2015. According to National Australian Bank (NAB) economist, David de Garis “the strength of the numbers had caught everyone off-guard, probably including the Reserve Bank.” Considering that the country is going through the biggest mining pullback in a long time, this report is considered very positive, and could mark the end of the RBA rate cuts potential.
The week ahead: Carney’s speech, Canada rate decision, ECB Press Conference
Bank of England Carney speech
BOE governor Mark Carney is due to testify, along with BOE Deputy Governor Jon Cunliffe, on United Kingdom’s European Union (EU) membership before the Parliamentary Committee, in London. They will now be expected to give a view on the economic and financial costs and benefits of EU membership. In the BOE’s report in October, the central bank detailed the potential impact of membership on its mandate, but failed to give a detailed assessment of the merits or demerits of a Brexit. On Wednesday, the UK manufacturing Production m/m is due, forecast to show a 0.2% change in the total inflation-adjusted value of output produced by manufacturers. The Sterling has found renewed strength against the USD, and is expected to strengthen further after hitting a 7 year low.
Bank of Canada rate decision
Bank of Canada policy makers have opted to leave interest rates unchanged since May, as they see stronger U.S. demand, a weaker Canadian dollar and two rate cuts last year are leading the economy out of an oil slump. The rates are expected to be held at 0.5% for this month. On Friday, Canada’s Employment Change and unemployment rate will be released as well, forecast to come at 10.2k and 7.2% respectively.
ECB press conference
With the negative headline inflation likely to encourage further monetary stimulus, at the ECB press conference, policy makers are left with the challenge of determining whether the oil’s slump is mainly responsible for the euro area into deflation. And to know if price weakness is becoming ingrained in the economy. The Euro has been quite positive lately, with this report likely to be a major mover for the bloc currency.
In conclusion, it promises to be an interesting week as we also have the Reserve Bank of New Zealand rate decision as well as the US unemployment claims.
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