Major Events of Last Week
The USA published a key indicator towards the end of last week confirming that its economic growth had slumped during the last quarter of 2015. GDP slipped downwards to 0.7% missing analysts’ predictions of 0.8%. This deterioration was primary caused by waning global demand and a strong US Dollar which combined to drive exports lower. The major impact of this weak data is that it could prompt the Fed to place its new monetary tightening policies on hold by postponing a second rate hike until the mid-summer. Consequently, prominent economists are now forecasting that the financial markets should stabilize, at least in the short-term, after experiencing recent levels of substantial volatility.
The BoJ stunned the world last Friday by surprisingly dropping its main interest rate to beneath parity. An official spokesperson informed that the primary reasons behind this bold move were to counter the persistent threat of deflation and bolster the faltering Japanese economic recovery. As a direct consequence of this dramatic development, the Yen tanked while global bonds and equities surged higher. During an accompanying press conference, Haruhiko Kuroda, the BoJ Governor, explained that these measures should now assertively convince investors that the BoJ is truly dedicated in achieving its inflationary target of 2% as quickly as possible and, as such, is willing to implement whatever is necessary in order to accomplish this primary objective.
Oil prices succeeded in rebounding from a 12-year low of just under $28 per barrel to nearly $35 late last week. This significant bullish correction was underpinned by news that major producing nations should agree a deal in the imminent future capable of significantly reducing the current historic crude glut. For instance, Russia, which is a non-OPEC member, set the ball rolling by advising that it is now prepared to negotiate with OPEC about this vital project after refraining from doing so for practically 15 years.
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What to Expect This Week
China will kick-off events by presenting its Manufacturing Purchasing Managers Index (PMI) for January early Monday morning. Economists will be keen to assess this indicator because it could provide vital insights into the health of the world’s second largest economy. A reading below 50 has the potential to initiate another market sell-off.
Later, the US Institute of Supply Management will proclaim its own Manufacturing PMI for January which should extend a sequence of consecutive declines. The US Dollar will come under pressure if such an outcome is confirmed. The Reserve Bank of Australia (RBA) will finish the day by announcing its latest Interest Rate Decision and Monetary Easing policies. As the RBA is not anticipated to make any unexpected changes, this could well be a non-event.
On Tuesday, New Zealand will issue its Employment Report for the last quarter of 2015 which should indicate that job growth rebounded from the serious decline it registered in November. Nevertheless, the national Unemployment Rate is still expected to inch upwards to 6.1%.
The United Kingdom will post its Services PMI on Wednesday. The vital service sector should expand once again by producing another 50+ result. Next, the USA will release a major Employment Report advising on how many new jobs were created by private employers during January. Traders will analyze this document carefully with the intent of fine-tuning their forecasts for the release of the Non-Farm Payroll figure, scheduled on Friday. The USA will later publish its Non-Manufacturing PMI. A number above 55 is required in order to stabilize investor confidence.
On Thursday, the Bank of England (BoE) will declare its latest Monetary Easing amendments and Interest Rate Decision. This could well be just a dull affair as no major changes are predicted this time around. Australia will complete the day by revealing its Retails Sales for December which should record growth of 0.4% on a monthly basis. The Reserve Bank of Australia (RBA) will also disclose its latest quarterly forward guidance statement at the same time detailing the current state of the national economy and listing appropriate policy strategies.
The pivotal event of the week will occur on Friday when the USA issues its labor report for January. Non-Farm Payrolls (NFP) should verify that US employers generated over $250 new posts once again last month. Traders will also be keen to study other key parameters, such as any revisions to previous reports and the average hourly earnings, etc.
