Last week, a mixture of economic data and politics pushed the stock market higher with the Dow and the S&P reaching an all-time high.Economic data showed a strengthening job market. Non-Farm payrolls of 216K beat the expected 200K while the unemployment rate remained steady at 4.1%. On politics, investors focused on Washington where the conference is deliberating on the final bill. This week Focus on Central Banks.
This week, the main theme to investors will be Central Banks. On Tuesday, the Fed will meet and announce its interest rate decision on Wednesday. Investors and analysts expect the Fed to raise interest rates by between 100 and 150 bps. The data released last week makes a further case for a rate increase.
The rate hike is unlikely to move the market and the dollar higher because it has already been priced in by investors. What is likely to shake up the market will be Yellen’s speech, 30 minutes after the release. Investors will watch out for indications on inflation and the number of rate hikes to be expected in 2018.
After the Fed, investors will wait for the rate decision from ECB. Investors don’t expect a rate increase this time but they will pay close attention to Mario Draghi’ address after the release of the data. They will listen for his plans on easy money and the 2020 inflation projections. In the last conference, Draghi said that they would cut its bond purchases in half from January and raised suspicions on what will happen in future.
On the same day, the Bank of England (BOE) will meet and release its interest rate decision. Analysts expect no major change on the decision. In the last meeting, the BOE increased rates by 25 bps but issued caution of future hikes. While the decision the BoE makes could move markets, the key theme will be Brexit with negotiations expected to continue. As a result of Brexit, the UK economy is grappling with low wage growth, weak productivity, and low inflation.
Later in the day, the Swiss National Bank (SNB) will issue its interest decision. Investors expect the interest rates to remain unchanged at -0.75%. Like in the other banks, investors will pay close attention to SNB Chairman, Thomas Jordan who is expected to state his projections for 2018.
Apart from the Central bankers, investors will watch out for China which is expected to release its November industrial production figures. As the second biggest economy, China remains at the heart of all investors. A slow growth could lead to significant impacts on the global markets. Investors expect an increase of 6.2% which will be unchanged from the previous month. Other significant data from China will be the fixed asset investments, housing prices, and retail sales.
As mentioned, this week, investors will focus on central banks and economic calendar will be secondary. On Monday, the Bureau of Labor Statistics will release the JOLTs job openings which are expected to fall marginally from 6.09M to 6.03M.
On Tuesday, the Office of National Statistics in the U.K. will release inflation data which is expected to remain unchanged. Investors will watch out for this as it could play a role on BoE’s interest rate decision.
On Wednesday, apart from the Fed, investors will watch out for U.K’s earnings change, and claimant count change. They will also watch out for the inflation data from the U.S. and crude oil inventories.
On Thursday, they will watch out for employment change data from Australia, UK’s retail sales, and U.S core inflation data.