Week Ahead: RBA, FOMC, BOE and Nonfarm Payrolls

EUR/USD Forecast: Stairway to hell, NFP and Fed likely to fuel the current trend.

Hopefully the volatility during the month of April should continue at least through the first week's of May.


If you want to earn money trading with leverage, this coming week is the Super Bowl.


Last week, volatility was high as markets digested news that China may enter more lockdowns, worried that inflation will continue to rise, and saw negative US Q1 GDP and earnings surprises. This week the volatility is likely to continue as central banks and jobs reports from around the globe will make headlines. The RBA, FOMC, and BOE all meet this week to discuss interest rate policy. Will the recent volatility cause them to pull back on the reins or will inflation worries cause them to raise rates, possibly by even more than markets anticipate? In addition, the US will release Non-Farm Payrolls. The Fed will be paying extra attention to the Average Hourly Earnings component of the report, as the Q1 Employment Cost Index came in hot. Stay alert for continued volatility this week!


RBA


The RBA is expected to remain on hold this week even though the Q1 inflation report was higher than expected. The RBA’s preferred measure of inflation is the RBA Trimmed Mean CPI, which came in at 3.7% YoY vs 3.4% YoY expected and only 2.6% YoY in Q4 2021. Note that the RBA targets 2% to 3% inflation. The higher inflation data suggests there a chance of a 15bps hike, which would take rates from a record low 0.1% to 0.25%. At the last meeting, the RBA board said it wanted to wait until inflation was “sustainably” within the 2% to 3% target range. Will the RBA consider the 3.7% inflation print to be sustainable, or will it wait for more data?


FOMC


The FOMC is expected to raise rates by 50bps when it meets this week, thereby increasing the Fed Funds rate from 0.5% to 1.0%. Many Fed speakers, including Fed Chairman Powell, have already indicated as such. However, St Louis Fed President has left the door open for a possible 75bps hike! While that is not the consensus, markets are pricing in 50bps rate hikes for the next several meetings. Note that Q1 GDP released last week was -1.4%. This means that the Fed will be raising rates during (or just after) negative growth, high inflation, and the Russian/Ukraine War. Could this give the FOMC pause to only hike 25bps?


BOE


The Bank of England meets on Thursday this week and is expected to hike rates by 25bps, taking rates from 0.75% to 1.00%. However, whereas the Fed has yet to mention any worries about inflation hitting household incomes, the BOE is definitely worried about it. This is the main reason expectations are only for a 25bps hike, and not 50bps. BOE Governor Bailey recently said that the BOE is walking a very tight line between tackling inflation and the output effects of the real income shock. Is there a chance that the BOE may do nothing at Thursday’s meeting?


EUR/USD is oversold but has room to continue falling to 1.0339.

The EUR/USD pair plummeted to a fresh 5-year low of 1.0470 on Thursday, recovering some ground afterwards but still finishing the week in the red at around 1.0530. There was nothing actually new to send the pair further lower except the same market concerns that are pushing investors into safety, all of them linked to economic growth.


Earnings


Last week, markets saw negative earnings surprises from AMZN and GOOGL. In addition, there were downward revision to forecasts from AMZN and AAPL due to the lockdowns in China. Will the negative surprises continue this week? Some of the more important companies to report earning this week are as follows:


ON, ABNB, GBP, AMD, SBUX, PFE, BP, LYFT, TWLO, UBER, MRNA, VWAGY, AML, DASH, SHOP, LCID, RCL, SHEL, LAH, BOO, DKNG, IAG


Economic Data


As mentioned, Non-Farm Payrolls are to be released on Friday. Expectations are that 395,000 jobs will be added to the US economy for April. However, the US isn’t the only country releasing jobs data this week. Markets will also see employment data from New Zealand, Germany, and Canada. In addition, global PMI data for April will be released this week, including China. Traders will be watching to see how much of an effect the lockdowns had on manufacturing during April. Other important economic data to be released this week is as follows:


Monday


Global Manufacturing PMI Finals (APR)

Germany: Retail Sales (MAR)

US: ISM Manufacturing PMI (APR)


Tuesday


New Zealand: Building Permits (MAR)

Australia: RBA Interest Rate Decision

Germany: Unemployment Change (APR)

EU: Unemployment Rate (MAR)

EU: PPI (MAR)

US: Factory Orders (MAR)


Wednesday


Global Services PMI Finals (APR)

New Zealand: RBNZ Financial Stability Report

New Zealand: Employment Change (Q1)

Australia: RBA Chart Pack

Australia: Home Loans (MAR)

Australia: Retail Sales Prel (MAR)

Germany: Trade Balance (MAR)

UK: Mortgage Approvals (MAR)

UK: Consumer Credit (MAR)

EU: Retail Sales (MAR)

US: ADP Employment Change (APR)

Canada: Trade Balance (MAR)

US: Trade Balance (MAR)

US: ISM Non-Manufacturing PMI (APR)

US: Fed Interest Rate Decision

Crude Inventories


Thursday


OPEC+ Meeting

Australia: Trade Balance (MAR)

China: Caixin Services PMI (APR)

Germany: Factory Orders (MAR)

UK: BOE Interest Rate Decision

US: Unit Labor Costs Prel (Q1)

US: Nonfarm Productivity Prel (Q1)


Friday


Japan: Tokyo CPI (APR)

Australia: RBA Statement on Monetary Policy

Germany: Industrial Production (APR)

UK: Halifax House Price Index (APR)

Canada: Employment Change (APR)

US: Non-Farm Payrolls (APR)

Canada: Ivey PMI s.a. (APR)


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