March uncertainty start t increase even more with three major central banks' interest rate decisions and US labor market data, but still, we have many other numbers to watch. However, the focus still will be on Friday's US non-farm payrolls, where labor market conditions will tell us what exactly we have to expect from the Federal Reserve meeting next week. However, Fed Chair Jerome Powell's testimony to Congress will also be important to understand the market condition. Remember to follow the testimony on Tuesday and Wednesday.
1- Australian Retail Sales and RBA meeting
While we expect Australian Retail Sales and Trade Balance in January to grow to 1.9% and 13,181 mln, respectively, the Reserve Bank of Australia will also hold its monetary policy meeting to decide the interest rates. Recent data shows that the unemployment rate rose to 3.7%, and Q4 GDP growth was less than the consensus forecast. On the other hand, inflation remains quite elevated, even accounting for the slowing in January to 7.4% annually, it is still so high, and with higher inflation in other economies, the risk is so high. Therefore we expect RBA to raise its policy rate by 25 bps to 3.60%, signaling another 25 bps rate hike to 3.85% in April. That must help the Aussie against its crosses, mainly if the announcement discusses the need for more hawkish decisions to control inflation.
2- BoC meeting - Wednesday
There are many differences of opinion about the Bank of Canada's decision. While consensus estimates are about a 25 bps rate hike before ending the cycle, some analysts believe the Bank of Canada can be the first central bank to complete the interest rate hike cycle for now. The ongoing deceleration in inflation, in line with slower economic growth as the GDP data show, can convince some policymakers to slow down, sit and wait to see the effect of decisions made so far. On the other hand, re-increasing inflation in the US and Eurozone may cause doubts. If BoC raises the rates, CAD can regain its losses, but if the central bank keeps its policy rate steady, Loonie can lose further.
3- US JOLTS - Wednesday
Even though 11 million job openings in December still represent a modest decline from the peak of nearly 12 million in March 2022 can give some signs of labor market cooling, it is still much higher than the 7 million job openings in February 2020 before the pandemic. For January, the consensus estimate is 10.600M, which is still an excellent number to confirm the strong job market in the US. These robust data are supposed to help the US dollar hold its recent gains.
4- BoJ Interest Rate Decision & Statement - Friday
That will be the last meeting held under Mr. Kuroda's chairmanship before Mr. Ueda takes over in April. According to Mr. Ueda's parliamentary hearing in February, he would back the central bank's ultra-accommodative policy for now, but since there will be a big gap between the BoJ and other central baks' policies and most probably Bank of Japan could reach some of its targets by year-end, expecting a shift in policy stance in last quarter of this year will be logical.
5- US NFP - Friday
It will be the most important data to watch after Fed chair Powell's testimony in the week ahead. January data, published on February 3, confirmed the fantastic condition of the US job market. With 517K newly created jobs, the unemployment rate fell to 3.4% and hit a 53-year low. With another 200K newly expected jobs, the unemployment rate should be unchanged at 3.4%. In addition, the Average Hourly Earnings in February should increase by 4.7%. Estimated data will support the DXY bulls and hold the pressure on the US stock markets.