- Data from the February employment report in the United States, due to be released on Friday, will give more insight into the strength of the labor market.
- The US economy is expected to have added 200,000 jobs in February, moderating from record job growth in January.
- Powell’s testimony before Congress will be closely watched for clues as to whether a larger rate hike is being considered this month. Markets could also be volatile ahead of the Fed’s March meeting.
- Another possible volatility is expected before the next Fed meeting in March. Meanwhile, the fourth-quarter earnings season is drawing to a close, with most companies beating consensus estimates.
- The central banks of Japan, Australia and Canada will also hold meetings this week.
According to experts, data from the February employment report in the United States, due to be released on Friday, will give more information on the strength of the labor market. Investors will be watching Federal Reserve Chairman Jerome Powell’s testimony before Congress for information on the future of interest rates. Equity markets are expected to remain volatile this week as the central banks of Japan, Canada and Australia hold meetings and data from the UK will also show how the economy held up earlier in the year.
The February jobs report is the last before the next Fed meeting on March 21-22, and is considered extremely important after the strong report in January, which caused investors to reassess their expectations about future interest rates. The US economy is expected to have added 200,000 jobs in February, moderating from record job growth in January. Another stronger-than-expected report could raise expectations for more aggressive action by the Fed to raise interest rates.
Investors expect the Federal Reserve to raise rates by 25 basis points this month, but market expectations indicate a slightly higher chance of a hike than in the past.
Powell’s testimony before Congress will be closely watched for clues as to whether a larger rate hike is being considered this month. Markets could also be volatile ahead of the Fed’s March meeting. Powell has said the January jobs report showed why the battle against inflation “will take quite some time.”
As for the market, after a volatile week on Wall Street, the S&P 500 and the Dow Jones Industrial Average posted gains late in the session on Friday. Investors feared that the Federal Reserve would raise interest rates, causing markets to fall during February. However, another possible volatility is expected before the next Fed meeting in March. Meanwhile, the fourth-quarter earnings season is drawing to a close, with most companies beating consensus estimates.
However, the central banks of Japan, Australia and Canada will also hold meetings this week. The Bank of Japan will meet under the leadership of outgoing Governor Haruhiko Kuroda before his successor Kazuo Ueda takes office on April 8. Recent economic data from Australia suggest rate hikes are unlikely. The Bank of Canada will meet for the first time since announcing a conditional pause in January and is expected to hold rates steady.
Finally, data from the UK will show how the economy held up at the start of the year, after narrowly avoiding a recession in the last quarter of 2022. While economists expect GDP to have expanded by just 0.1% in January Compared to the previous month, economic growth is expected to show slightly more momentum than anticipated and wage growth is expected to be faster than anticipated by the Bank of England. However, the UK remains the only G7 economy that remains smaller than it was before the pandemic.
