War, Central Banks, and NFP
The week ahead will be a heavy week with too much data and events. Central banks in Canada and Australia will be the first central banks in the next round of monetary policy meetings. And while supply chain disruptions were slowly disappearing, the Russian and Ukrainian conflict increased the level of tensions and concerns on the future of the energy market. Higher energy prices will end with a longer life of high inflation. We have to wait and see what will be the fate of ongoing war, while we have other economic data as well to watch.
RBA monetary policy meeting - Tuesday
While according to the economic data and inflation numbers market participants were waiting to see that RBA increasing interest rates to 0.50% by year-end from 0.25% previously, current international conflict can increase the concerns on economic developments. Therefore it will be a hard decision, which is the reason to say, for now, no action is expected in March meeting. This expected decision must be positive for the Australian stock markets or at least soften the overall ongoing pressure on the stock prices.
US ISM Manufacturing and Services Index, Tuesday - Thursday
While increasing Manufacturing activities in January in expansionary territory confirms that supply chains issues thawing slowly, falling ISM services index to its lowest level in 11 months reflects the labor shortage and continuing Covid effects, especially the Omicron variant. Now in February numbers, the ISM Manufacturing index is expected to rise to 58.0, and the Service index is expected to rise to 61.00. Both positive data are supposed to lift the US Dollar.
BoC Monetary policy meeting - Wednesday
Bank of Canada was one of the first central banks that took Hawkish decisions. They ended asset purchases ahead of schedule and now we can see that rate hikes could be delivered earlier than expected. If the ongoing geopolitical tensions do not make any changes in their decisions, BoC members are supposed to hike the interest rates by 25 basis points. Canadian Inflation this January advanced to 5.1%, which is the fastest pace in 31 years, and increasing the reasons for a rate hike several times this year. This decision must help the Canadian Dollar against its crosses.
OPEC-JMMC Meetings - Wednesday
OPEC meeting in the week ahead will be in the spotlight, while Oil prices test the 7 years high and the Russian attack on Ukraine going to create an energy crisis in Europe. The main question in the energy market now is about the fate of the oil and gas market. If Russia withdraws or fade out from this market, can other suppliers compensate this shortage? For now, markets will be focusing on OPEC, and its allies known as OPEC+ production decisions.
US employment data - Friday
Despite spreading the Omicron variant of coronavirus, 467K newly created jobs were a surprise in January. So far, nonfarm payrolls have recovered 87% of the losses during the pandemic. On the other hand, earnings are expected to rise 0.4%, after 0.7% and 0.5% increase respectively in January and December, while February jobless rate is expected to fall back to 3.9% from 4.0% in January. Estimated numbers should confirm the development of the US employment market. These data again must support the earlier decided tightening policies and put some more pressure on the stock markets.
