The US dollar made an attempt to recover but the results were mixed in a very busy week. What’s next? The focus shifts away from the US as we have three rate decisions and two jobs reports from other places Here are the highlights for the upcoming week.
The US economy 200K jobs in January and more importantly, saw wages rise by 2.9% y/y, in what seems like a more sustainable acceleration in pay. This sent the dollar higher after a week that saw it struggling to recover. Yellen’s last Fed decision saw very subtle changes to the statement no rate hike. These changes were slightly hawkish but the dollar’s reaction was limited. Elsewhere, euro-zone core inflation advanced to 1% as expected while UK PMIs missed expectations. Australian inflation came out a bit below expectations while Canada’s GDP returned to a healthy rise of 0.4%.
- UK Services PMI: Monday, 9:30. The services sector is the most important one in the UK and the publication of Markit’s services OMI always moves the markets. The sector has been experiencing OK growth according to Markit: a score of 54.2 in December. The first release for 2018 is expected to be very similar: 54.1 points.
- US ISM Non-Manufacturing PMI: Monday, 15:00. The services sector report sometimes precedes the Non-Farm Payrolls, but this time it stands on its own. A level of 55.9 was recorded in December, showing good growth. A rise to 56.5 is expected now. The parallel figure for the manufacturing sector came out above the early projections.
- Australian rate decision: Tuesday, 3:30. The Reserve Bank of Australia makes its first rate decision for the year after taking a break in January. Since its last meeting in December, the world continued growing at a robust pace and this helped the economy. Job growth was solid as well. On the other hand, the recent inflation report fell short of expectations and the high exchange rate does not make the RBA happy. Given the most recent slide, will the RBA try to hit the Aussie when it’s down?
- New Zealand jobs report: Monday, 21:45. New Zealand publishes its labor market report only once per quarter, giving every publication a lot of oomph. In the third quarter of 2017, the economy saw a big jump in employment: 2.2%, far above expectations. This time, a modest rise of 0.4% is on the cards. The unemployment rate is forecast to rise from 4.6% to 4.7%.
- Bill Dudley talks: Wednesday, 13:30. The outgoing President of the New York Fed, a permanent voter on the FOMC, has been aligned with the central thinking of the Fed, especially with that of now-former Fed Chair Janet Yellen. He will speak at an event in New York and may comment on the jobs report as well as on the path of hikes for the Fed.
- New Zealand rate decision: Wednesday, 20:00. The Reserve Bank of New Zealand is expected to leave the interest rate unchanged at 1.75%. That doesn’t mean no impact on markets. The central bank will have the chance to lay out its updated goals on monetary policy, react to the jobs report and perhaps talk down the currency. The press conference is scheduled for 21:00, an hour after the release and Governor Spencer will also address lawmakers at 00:00. It will certainly be a busy time for the NZD.
- UK rate decision: Thursday, 12:00. The Bank of England is expected to leave the interest rate unchanged at 0.50% after hiking it to this level in November. However, they will certainly move the market. In addition to the decision and the meeting minutes, the BOE will also publish the Quarterly Inflation Report, which contains a wider assessment of the economy and the path of inflation. This “Super Thursday” becomes even more “super” with the publication of the Inflation Letter. Governor Mark Carney is obliged to send an open letter to the Chancellor of the Exchequer Phillip Hammond and explain why inflation breached the 1-3% range. This happend for a short time and inflation is expected to fall. Nevertheless, the abundance of documents that the BOE releases should supply a lot of material to move markets. The initial response will likely come from the voting pattern. Any deviation from a unanimous vote to leave rates unchanged will stir the pound. Afterwards, the assessment of the economy and more importantly, inflation, will have its say.
- Canadian jobs report: Friday, 13:30. Canada gained around 79K jobs in both December and November, outstanding figures. This time, no big changes are expected. IT will not be surprising to see a drop in jobs and that could trigger a sell-off of the Canadian dollar. A small slide of 2K is on the cards. The unemployment rate is projected to rise from 5.7% to 5.8%. The Canadian jobs report is published after the US Non-Farm Payrolls, allowing for reaction to the jobs report in USD/CAD.