NFP, Earnings, and Central banks!
After Federal Reserve, now it is the BoE, ECB and RBA turn to hold their monetary policy meeting. However, OPEC meeting and the US labor market data also must be watched closely in line with other important data, including employment data from Canada and NZ, and European CPI & GDP. In the financial markets, still, earnings reports are continuing and, as you know, we are waiting for more companies to publish their reports in the week ahead, while we should not forget about global geopolitical tensions.
Reserve Bank of Australia – Tuesday
While Monday, and Tuesday, most Asian markets will be closed due to the Chinese New Year, the Reserve Bank of Australia will hold its policy and interest rate decision meeting on Tuesday. The Australian Labor market is well growing with unemployment at 4.2%. Therefore, with inflation at 3.5%, now pressures on RBA are getting more to start increasing the rates. However, despite all improvements and speculations, it is still expected to stay on hold. But to mention in the announcement that they are ready to take the step in near future. That must still hold the pressure on the Australian Dollar.
US ISM Manufacturing & Services PMI - Tuesday & Thursday
As last week's European PMI data showed, Omicron's concerns in January affected the Manufacturing and service activities. For the United States, now we are expecting to see a bit weaker numbers. Consensus expectations for the ISM manufacturing index are to decline to 57.5 in January, and the ISM services index to fall to 59.3. These expected data should not be supportive of the US dollar.
Bank of England – Thursday
It was the first G7 member that increased the rates, and now we are expecting that BoE to stay hold and wait for more market adjustment to take a new step. The BoE already lifted the interest rate by 15bp to 0.25% in December. And despite the increasing inflation to 5.4%, still, the economy is suffering in its recovery path, therefore MPC members would like to wait at least until February meeting for the expected 25bp rate hike to 0.50%. If as expected, the Central bank in the United Kingdom makes a noncombative decision and does not do unexpected movements, British Pound still must be under pressure!
ECB Meeting – Thursday
On the same day with BoE, the European central bank also will hold its monetary policy meeting. It is a long time that market participants and investors are waiting to see the ECB's reaction to the increasing inflation. ECB PEPP program is supposed to end in March and they are planning to increase the APP pace through the second and third quarters, and now it seems the time to be a bit stricter. Therefore, expecting to see a 10bp rate hike sounds plausible. If the ECB increases the rates, then at least for the short term we can see the Euro in a bit stronger position, and if not, weakness can continue through February as well.
US employment data - Friday
Three times out of the past four reports, we missed the None Farm Payroll estimated numbers. Now analysts decreased their expectations to 155,000 Jobs in January due to ongoing labor shortages, while JOLT's numbers are still way above 10 Million. In the last months, household employment increased and lowered the unemployment rate down to 3.9%. In this report, besides the unemployment rate that we are waiting to see unchanged at 3.9%, we have to closely watch the average earnings and participant’s rate as well. Considering the lower estimate, beating the expectations is likely, therefore we can see the stronger USD before ending the week.
Earnings Reports - Across the week
According to Refinitiv, so far, 168 companies of the S&P 500 have reported, and 77% of them have beaten estimates, therefore the January effect is still positive, and we can be optimist for the rest of the year. While Apple lifted the markets with almost 7% gain after the positive report, in the week ahead, we have more important reports to watch. Google, Exxon Mobil, PayPal, and AMD on Tuesday will heat the markets, Facebook, Alibaba and eBay will be in the spotlight on Wednesday, and Amazon, Royal Dutch, Honeywell, and Eli Lilly's reports on Thursday will be the most important earnings reports to follow.