Top Market Drivers This Week – Introduction
This will be an important week for the financial markets. It is a week which could see serious implications in the financial markets. Here are the major events that global investors will be watching.
First, they will focus on the global trade war which is likely to be initiated by the Trump administration. A senior economic advisor for the president said that Trump was likely to sign the new policy by the end of the week. The new policy will introduce a 25% and 10% on all steel and aluminum imports respectively. At the same time, the policy will lead to reciprocal taxes from the countries likely to be affected.
Second, there will be minor focus on Europe where Germany Chancellor Angela Merkel got a mandate to form a government for what many expects to be her final term as chancellor. This is not the coalition that Merkel wanted but it was her final choice. In Italy, the third largest economy went to an election which ended with the populist party taking more seats than expected.
Third, traders will focus on American employment numbers. These numbers are likely to be major market movers during the week. On Wednesday, ADP will release the non-farm payrolls data. This will come a day before the official government data. Traders expect the ADP’s numbers to show that the economy created 194K jobs in February, down from 234K in January. On Friday, the US will release its government data on employment. Traders expect that the country will release 204K jobs in February with the unemployment rate falling to 4.0%. They expect wages to grow by 0.3%. These numbers are so important because they will play a role in the Fed’s interest rate decision going forward.
Fourth, there will be a focus on central bankers who will meet and release their interest rate decisions. First, the Reserve Bank of Australia (RBA) will release its interest rates decision tomorrow. The expectations are that the bank will leave rates unchanged as the country continues to struggle as it transitions from the mining industry.
On Wednesday, the ECB will release its interest rate decision after completing the two-day meeting. Nothing of value in terms of forward guidance and interest rate hikes will come from the meeting. Already, Mario Draghi has already indicated that he plans to stop the easing program in September. Traders will want to hear whether he has changed mind about that and his thinking about the state of the economy.
On Friday, traders will focus on Bank of Japan, which is one of the most important central banks in the world. The meeting comes a week after Kuroda addressed parliament and promised to start unwinding the large stimulus package in 2019. This was the first time Kuroda was giving a forward guidance about his plans. Therefore, there are no chances that the bank will move to hike rates.
On Wednesday, the Canadian Central Bank will release its interest rate decision. After hiking last month, there is very little chances that the country will move to hike rates this month as the economy has shown some weaknesses.