Markets brace for a blockbuster week with 3 central banks hiking rates
It’s hard to believe that the fifth trading week of 2023 is already upon us. Yet, here it is. Featuring a collection of central bank announcements, not to mention US Non-Farm Payrolls (NFP), the coming five days on the markets are filled with promise.
On the heels of last week’s hot CPI numbers out of New Zealand and Australia, all eyes are hyperfocused on inflation. How will the world’s central bankers react to an uptick in prices? Are we in for more rate hikes and hawkish talk, or will a soft landing and dovish pivot be the tone? By late Thursday, we’ll have our answers.
If the Bank of Canada (BoC) is any barometer, then a series of measured rate hikes from the US Federal Reserve (Fed), Bank of England (BoE), and European Central Bank (ECB) are likely.
Of course, central bank announcements are about much more than that day’s interest rate policy — forward guidance is everything! Comments from Jerome Powell, Andrew Bailey, and Christine Lagarde have the potential to send the markets instantly directional. Without question, the Wednesday and Thursday sessions will be range-busters.
In the markets, time is money. This week, there will be no time to sit back and digest what the Fed, BoE, and ECB had to say. During Friday’s pre-Wall Street open, NFP will hit the newswires. For December 2022, US Non-Farm Payrolls came in at 223,000; consensus estimates are looking for this number to fall to 175,000 for January 2023. Regardless of where NFP lands, the action will intensify as the markets price the state of American labor.
As you can see, this week is overflowing with vital fundamentals. Let’s look at how to trade the action and collect a few green pips.
Monday can safely be described as the “calm before the storm” with an extremely light set of news events. Traders may want to warm up in Europe as Spanish CPI and German retail sales are due out. Although these are unlikely to be substantial market movers, there are opportunities on Euro pairs right now, and the recent pullback could provide an excellent opportunity to go long here.
Key Market: EUR/JPY
Tuesday is the day more significant news starts to trickle through the financial world. The high-impact events traders should be aware of are Canadian Gross Domestic Product and New Zealand's key employment data.
The Australian Dollar has been on a rampant run against the Kiwi Dollar in recent times, with five out of the last six weeks seeing AUDNZD post positive returns. Will it be a case of “more of the same” in this pair?
Key Market: AUD/NZD
Wednesday… Fireworks. It is as simple as that with one of, if not the most, anticipated events of the year so far in the form of the Federal Reserve's interest rate decision. The Federal Reserve, according to the markets, are 99.9% likely to hike rates by 25bps, and thus it will be the FOMC Press Conference half an hour later that is going to cause the volatility. Before all of this though, traders will receive data in the form of ADP Non-Farm Employment Change, ISM Manufacturing PMI, and JOLTS Job Openings.
Key Market: NASDAQ
The central bank action continues on Thursday with the Bank of England and the European Central Bank both delivering their next batch of interest rate hikes. Over in the Eurozone, Christine Lagarde has been noticeably, and convincingly hawkish any time she has had the chance to speak. Over in the UK, substantially weak data is piling the pressure on the BoE to hold back a tad more. This will be a fascinating session.
Key Market: EUR/GBP
Anyone who is expecting a calm end to the week will have a rude awakening, it’s US Non-Farm Payrolls day! This is always volatile in any climate, but especially in today’s one where the jobs market in the US is holding firm… for now. Will this be the first time there is a significant decline in the jobs market? If so, expect quick, sharp market movements around the release.
Key Market: XAUUSD.
ECB, BoE, Fed, and NFP? All in one week? Without question, the fifth trading week of 2023 is a blockbuster. It will pay to have your game plan ready, stops down, and leverage in check ahead of each epic event.
Best of all, we’ll be with you every step of the way. The analyst team of Nick Quinn, Connor Woods, and I will bring you the Fed, BoE, ECB, and NFP events live as they happen. We have a collection of dual and tri-streams scheduled and ready to go. If that’s not enough, with our Live Squawk feature, we’ll pass along breaking news and insights in real-time.
So, batten down the hatches! Prepare for a monumental week on the markets, and we’ll see you on our next live stream!