Last week, both the US Federal Reserve Bank and the European Central Bank hiked rates by 25 basis points and indicated that they are adopting a data-dependent approach to monetary policy decisions going forward. The Bank of Japan, on the other hand, chose to hold rates steady at -0.1% but surprised the markets with an adjustment to its yield curve control from a limit of +-0.5% to +-1%.
Personal consumption expenditures (PCE) report released last Friday, the Fed’s preferred price gauge, slowed to 3% year-on-year in June which led to the speculation that July’s rate hike may be the last of this cycle.
This week, global markets are expected to be highly volatile as we expect an interest rate decision by the Bank of England (BoE) monetary policy committee. The BoE is expected to hike interest rates by 25 basis points to 5.25% and release a monetary policy report on Thursday at 2:00 pm EAT. The BoE governor Bailey will then host a press conference 30 minutes after the rate decision.
The UK has the highest inflation of the G7 countries which stood at 7.9% in June. Core inflation hit a 31-year high of 7.1% in June and this is hurting consumer spending in the UK. The BoE has implemented the fastest monetary tightening cycle in 30 years to control inflation back to the 2% target. This week’s meeting will be important for investors to understand the economic indicators that the BoE is using for policy decisions and grab an outlook of what the BoE is looking to do in the next couple of months.
The Reserve Bank of Australia (RBA) is expected to meet on Tuesday at 7:30 am EAT. Analysts estimate that the RBA will likely vote for a 25-basis point hike to 4.35%. The RBA is expected to continue tightening policy to control inflation which stood at 6.0% in June.
The US will release a host of job market reports that will likely increase volatility in USD pairs, US equity indices, gold, and oil prices. On Tuesday, the US Bureau of labor statistics will release the Job Openings and Labor Turnover Survey (JOLTS) report at 5:00 pm EAT. This will help investors understand the trends in job advertisement which are a leading indicator of overall employment.
On Wednesday at 3:15 pm EAT, Automatic Data Processing Inc. (ADP), will release the ADP non-farm employment change report. This will help investors understand the number of jobs created in the US private sector in July. This will be followed by the weekly unemployment claims report on Thursday at 3:30 pm EAT.
The most important economic report for US markets investors and traders will be the official non-farm payrolls which will be reported on Friday at 3:30 pm EAT. The report will show the number of non-farm jobs created in July, the average hourly earnings change, and the overall unemployment rate in the US. Analysts estimate that the US created 200k non-farm jobs in July and that wages increased by 0.3% in July compared to 0.4% in June. Overall unemployment is expected to be steady at 3.6%, the same as in June.
After the Fed changed monetary policy to a data-dependent approach, the job market report will be very influential to what the Fed decides at the next meeting in September. This implies that the market participants will likely react to the job report in a bid to front-run the Fed decision.
Canada will also be releasing its job market report on Friday at 3:30 pm EAT. Analysts estimate that Canada created 15.5k jobs in July and that the unemployment rate rose to 5.5% from 5.4% in June.
Data released on Monday morning showed that the Chinese manufacturing sector is improving but remains in the contraction territory for the 4th straight month while the services sector was cooling off in July but remained in the expansion territory.
On Monday, the Central Bank of Kenya (CBK) launched DhowCSD, an online platform and mobile app for trading bonds directly without brokers. This is expected to increase liquidity in the bond market and allow Kenyans living in the diaspora to access the market online.
The earnings season is still hot with Microsoft and Google reporting better-than-expected earnings last week. This week, Advanced Micro Devices (AMD) will be reporting quarter two earnings on Tuesday after market close, and Amazon & Apple on Thursday after market close. Analysts estimate that the iPhone maker will report earnings of $1.08 per share (-10% YoY) on revenue of $73.7 billion (-11.2% YoY).
Other notable companies releasing earnings this week include Caterpillar, MicroStrategy, CF Industries, PayPal, Shopify, Occidental Petroleum, Marathon Petroleum, Block, Coinbase, GoPro, and Moderna.
The geopolitical heat is hottest in Niger where a coup was done last week. Uranium commands about 75% of Niger’s exports and instability in the uranium-rich country could disrupt global uranium prices.
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The author is the Lead Market Analyst – FXPesa
