Friday’s February U.S. jobs report will shed more light on the strength of the labor market, and investors will be watching Federal Reserve Chairman Jerome Powell’s remarks to Congress for new insights into the future direction of interest rates. Equity markets will remain volatile, the central banks of Japan, Canada and Australia will gather and UK data will reflect how the economy has held up at the start of the year.
Here’s what you need to know to start the week.
1. Non-farm Employment Report
Friday’s February jobs report will be the last before the Fed’s next meeting on March 21-22, and takes on particular significance after January’s extraordinary report prompted investors to rethink expectations about the future path of interest rates.
Everything indicates that the economy will have created 200,000 jobs last month, moderating the spectacular growth of January (517,000 jobs), and that the unemployment rate will have remained stable at five-decade lows (in the 3,4%).
Another stronger-than-expected report could stoke fears of more aggressive action by the Federal Reserve (strong demand in the labor market bolsters wage growth, contributing to higher inflation), keeping pressure on the Federal Reserve to raise rates.
Investors currently expect another 25 basis point hike from the Federal Reserve this month, but Market prices They suggest a slightly higher probability of a higher rise than previously thought.
2. Powell’s appearance
Ahead of Friday’s jobs report, Powell will appear before Congress to present the central bank’s semiannual monetary policy report. He will testify before the Senate on Tuesday and before the House of Representatives on Wednesday.
His remarks will be closely watched for clues as to whether a further rate hike is being considered this month following recent data pointing to still-persistent inflation. Powell has said January’s jobs report showed why the battle against inflation “will last a long time.”
The Fed slowed the pace of rate hikes to 25 basis points at its last meeting on Feb. 1, following a 50 basis point hike in December that followed four consecutive 75 basis point hikes.
3. Volatility in the markets
Wall Street rallied on Friday at the end of a volatile week, in which the S&P 500 snapped a three-week losing streak and the Dow Jones Industrial Average It recorded its first weekly advance since late January.
After a sharp rally in January, stocks and bonds retreated in February on fears that the Federal Reserve will raise interest rates more than expected and keep them high longer to curb inflation.
The Federal Reserve’s March meeting could lead to more volatility in markets.
Meanwhile, the fourth-quarter earnings season is in its final stretch, and all but seven S&P 500 companies have filed their reports. The quarter’s results have beaten consensus estimates 68% of the time, according to Refinitiv data.
4. Central bank decisions
The central banks of Japan, Australia and Canada will hold their monetary policy meetings this week.
Bank of Japan Governor Haruhiko Kuroda to preside over his final final meeting after a decade at the forefront of the supervision of an ultra-loose monetary policy. No changes are expected before his successor, Kazuo Ueda, takes over on April 8.
The Reserve Bank of Australia It meets on Tuesday and, although officials had hinted at their meeting last month of the possibility of further tightening, investors now expect rates to remain unchanged after it was recently learned that the economy grew in the fourth quarter at its weakest pace in a year, and January figures indicating inflation may have peaked.
The Bank of Canada is also expected to keep interest rates unchanged in its meeting Wednesday, the first since policymakers announced a conditional pause in January to give the economy time to adjust to higher borrowing costs.
5. GDP of United Kingdom
Britain will release its GDP data on Friday, showing how the economy fared in January, after narrowly avoiding falling into recession in the final three months of 2022. Economists expect gross domestic product to have grown by only one year. 0,1% in January compared to the previous month.
The British economy is showing slightly higher-than-expected momentum and wage growth is being slightly faster than the central bank forecast last month, Bank of England chief economist Huw Pill said on Thursday.
That said, the UK is the only G7 economy that remains smaller than before the coronavirus pandemic. The International Monetary Fund believes it will be the only G7 economy to contract this year.
The Bank of England may have to keep raising rates as consumers appear to be holding back in the face of double-digit inflation.