Focus on RBA, BoC, and BoJ

On Monday 6th: The UK’s S&P Global/CIPS UK Construction PMI and the Canadian Ivey Purchasing Managers Index are due.

On Tuesday 7th: Australia and China’s balance of trade reports are due and the RBA meets on monetary policy.

On Wednesday 8th: Canada and the US’s balance of trade reports are due, while the BoC meets on monetary policy and the US JOLTS report is published.

On Thursday 9th: Chinese CPI and PPI data is due.

On Friday 10th: The BoJ meets on monetary policy, British GDP, Canadian unemployment data, and US Nonfarm and unemployment rate are all released.

Weekly outlook

Recent economic data has had some interesting surprises, and the markets are now attempting to figure out what this implies for the major central banks. Bond dealers have priced in terminal rates of over 5% in the US and approximately 4% in Europe, with no regard for reductions for the rest of this year. 

How the global economy responds to increasing interest rates and whether or not we have managed to avoid a recession are important factors that will determine the success of portfolios in 2023. 

Some notable monetary policy meetings are on the radar this week, with the RBA, BoC and BoJ all sitting to discuss where to set their target interest rates with differing expectations for their results. Also highly anticipated, is the Nonfarm payroll data out of the US after a shock result in January.

Monday 6th of March

The UK is due to release its S&P Global/CIPS UK Construction PMI at 9:30 AM GMT today. In January, output for construction fell to its lowest point since May 2020, as lower client demand and fewer new projects contributed to a 0.4 point dip in the index from the previous month, landing at 48.4. A slight recovery is expected for February to 49.5.

The Canadian Ivey Purchasing Managers Index is to be published at 3:00 PM GMT. After climbing from a revised 49.3 in December to 60.1 in January (the highest reading since May 2020), expectations are for a drop back to 55 for February.

Tuesday 7th of March 

After reaching a five-month high of AUD 13.47 billion in November, Australia’s trade surplus decreased to AUD 12.23 billion in December last year. An increase to AUD 12.500 billion is expected for January from the report due to be released at 12:30 AM GMT.

China’s Balance of trade is expected to show its surplus will show a jump from 78B to 100.0B as the economy begins to show signs of recovery.

The Reserve Bank of Australia is due for its Monetary Policy Meeting where it will reportedly decide to increase interest rates for the tenth time up to 3.6% from the previous 3.35%. This would bring the total for increases to 350 basis points and is on track for the fastest pace of rate hikes in over thirty years. The RBA Statement will be available from 3:30 AM GMT.

Wednesday 8th of March

Canada’s balance of trade report will reportedly reveal a widening deficit to CAD 500 million in data released at 1:30 PM GMT. The December 2022 trade deficit was CAD 160 million, which was down from the previous month’s upwardly revised shortfall of CAD 220 million.

The US trade deficit appears to be widening further in the report due to be published at 1:30 PM GMT. Expectations are it will hit $-68.8 billion after the December figure of $-67.4 billion. Imports have reached an all-time high in part because of growing inflation, high energy costs, and strong consumer demand.

The Bank of Canada is due to meet on Monetary Policy and release its statement at 3:00 PM GMT today. At its last meeting in January the board sent a warning that it would halt its aggressive tightening cycle if economic events pan out as predicted. This among other factors leads to a forecast of rates being maintained at 4.5% for the time being.

The US JOLTS Job openings report is set to be published at 3:00 PM GMT. After rising steadily since September 2022, the number of job opportunities in the United States in December 2022 reached 11.0 million, the highest level in five months. This is expected to have declined slightly to 10.6 million for January.

Thursday 9th of March

Chinese CPI data for January is forecast to show an increase in the annual rate of inflation to 2.3%, up from 2.1% in the report due at 1:30 AM GMT. Although inflation in China has been slowly rising in the last few months, going from 1.8% in December to 2.1% in January, it is still enviable to the majority of developed nations.

Released at the same time, the Chinese Producer Price Index is forecast to fall 0.5% in February after a drop of 0.8% year-over-year in January and 0.7% dip in December 2022.

Friday 10th of March

The Bank of Japan is due to meet on monetary policy today, with its statement published around 3:00 AM GMT. During its January meeting, the BoJ unanimously decided to keep its key short-term interest rate at -0.1% and that for 10-year bond rates around 0%. But contrary to market expectations, the board maintained its 0.5% bond-buying quota in January, suggesting that officials aren’t looking to relax their hold on bond rates in the wake of December’s surprise adjustment to the yield curve control range. Rates are expected to be maintained at the same level again for this meeting.

Fresh British GDP data is forecast to show 0% growth for the month of January when the report is released at 7:00 AM GMT. The economy had a decrease of 0.5% in December after having expanded in the previous two months.

The Canadian labor market continues to be tight, however the unemployment rate is expected to increase slightly to 5.2% when data is released at 1:30 PM GMT today. This is up from 5% in January and December.

The Nonfarm Payrolls report tracks the month-over-month change in the number of persons who were employed outside of the agriculture sector. Since achieving full employment is on the list of responsibilities held by the Federal Reserve, this metric is closely tracked. A total of 517k new positions were added to the US economy in January, which was much more than the monthly average growth of 401k in 2022. Expectations are for a reduced 200k figure for February when the data is published at 1:30 PM GMT, with the Unemployment Rate released at the same time with a forecasted rise from 3.4% to 3.5%.

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