General

Week Ahead: do central banks have the ability to change policy yet?

George Walker, Friday, 5 March 2021

Do central banks have the ability to change policy yet?
A seemingly quiet trading week begins with Bank of England Governor Andrew Bailey speaking Monday morning. Those trading the cable or footsie may want to listen in for any comments on the chancellor's budget, his thoughts on the UK's recovery from the pandemic, as well as the ongoing topic of Brexit and how leaving the EU may affect economic forecasts.
 

Up first: Japan's GDP

Moving into Tuesday's Asian session, Gross Domestic Product From Japan may impact the Yen late Monday night (Europe). The Bank of Japan will be looking for stronger numbers than expected as they aim to reverse the negative interest rates and avoid long-lasting effects on the economy.

Ahead of the ECB rate decision later in the week, traders holding any euro or EU index positions will be focused on the Unemployment Rate and Gross Domestic Product data Tuesday morning. Central banks now face the tough decision of when to start tightening monetary policy, leaving employment and GDP figures among those with the most influence to gauge their decision making.

Moving into Wednesday CPI inflation data, along with Producer Price Index figures out of China could be looked at as a measure of economic strength, and set the tone for markets overnight but potentially feeding into European markets in the morning.
 

Data's domino effect

The continuing rhetoric from the Federal Reserve has been one of no change to rates or stimulus for the foreseeable future, as Powell reiterated in his WSJ interview this past week. However, markets can often start to price in a change prematurely, and inflation is a major cause to start hiking interest rates. As a result, CPI data from the US during the afternoon has the potential to move the US dollar and US indices if the figures come in far off expectations.
 

Central banks review policy and rates

The Bank of Canada has dramatically cut their interest rate from 1.75% to 0.25% in order to limit the damage to the economy. Previous comments from the BoC indicate that they are prepared to do more if needed, though no change is expected to the benchmark in Wednesday's meeting. Will the accompanying statement and press conference provide clarity on forward guidance? If data shows signs of improvement, how soon will the BoC start to consider raising rates again, bearing in mind the bank's major objective is to maintain the loonie's value by keeping inflation low and stable.

At previous meetings, the European Central Bank has ramped up its stimulus programme, as well as kept interest rates unchanged. Doubts of the pace of economic recovery remain, and the central bank has stated they stand ready to act if need be. GDP estimates, the rollout of the vaccine, and regional lockdowns being eased will be focal points for traders Thursday afternoon. With no change in policy expected, traders will be paying close attention to the Press Conference for hints of whether the measures in place are working, or if change is needed to boost growth.

Finally, as always, Initial and Continuing Jobless Claims from the US will be eagerly awaited an hour prior to US markets opening to assess the health of the job market.

UK GDP and Manufacturing and Industrial Production data kicks off the final trading day of the week, with German CPI Inflation figures and Canada's Unemployment Rate wrapping up the day.

All times indicated are GMT.
 


ECONOMIC CALENDAR

(All times are GMT)

Monday, 8th March

05:00 JPY Coincident Index Preliminary
05:00 JPY Leading Economic Index Preliminary
06:45 CHF Unemployment Rate
07:00 GER Industrial Production
09:30 EUR Sentix Investor Confidence
10:00 GBP BoE's Governor Bailey Speech
23:50 JPY Gross Domestic Product
23:50 JPY Gross Domestic Product Annualised

UK Company Announcements:

Direct Line

US Company Announcements:

XPeng Inc

Tuesday, 9th March

00:00 AUD National Business Confidence Preliminary
00:00 AUD Activity Outlook Preliminary
00:30 AUD National Australia Bank's Business Confidence
00:30 AUD National Australia Bank's Business Conditions
07:00 GER Imports
07:00 GER Exports
07:00 GER Trade Balance
07:00 GER Current Account
10:00 EUR Employment Rate
10:00 EUR Employment Change
10:00 EUR Gross Domestic Product
11:00 USD NFIB Business Optimism
13:55 USD Redbook Index
21:30 USD API Weekly Crude Oil Stock
22:00 AUD RBA's Governor Lowe Speech
23:30 AUD Westpac Consumer Confidence

UK Company Announcements:

Cairn Energy
Standard Life Aberdeen

US Company Announcements:

N/A

Wednesday, 10th March

01:30 CNY Consumer Price Index
01:30 CNY Producer Price Index
12:30 USD Consumer Price Index
12:30 USD Consumer Price Index Core
12:30 USD Consumer Price Index ex-Food & Energy
15:00 CAD BoC Interest Rate Decision
15:00 CAD Rate Statement
15:30 USD EIA Weekly Crude Oil Stocks Change
19:00 USD Monthly Budget Statement
23:50 JPY Producer Price Index

UK Company Announcements:

Balfour Beatty
Foxtons
Just Eat Takeaway
Legal & General

US Company Announcements:

N/A

Thursday, 11th March

00:00 AUD Consumer Inflation Expectations
12:45 EUR ECB Interest Rate Decision
12:45 EUR ECB Deposit Rate Decision
13:30 EUR ECB Monetary Policy Statement and Press Conference
13:30 USD Initial Jobless Claims
13:30 USD Continuing Jobless Claims
18:30 CAD BoC's Schembri Speech
19:00 NZD Business NZ PMI

UK Company Announcements:

Morrison (WM)
Playtech
Rolls-Royce Holdings
WPP

US Company Announcements:
DocuSign

Friday, 12th March

07:00 GBP Gross Domestic Product
07:00 GBP Manufacturing Production
07:00 GBP Industrial Production
07:00 GBP Goods Trade Balance
07:00 GBP Total Trade Balance
07:00 GER Consumer Price Index
07:00 GER Harmonised Index of Consumer Prices
09:30 GBP Consumer Inflation Expectations
10:00 EUR Industrial Production
13:30 USD Producer Price Index
13:30 USD Producer Price Index ex-Food & Energy
13:30 CAD Unemployment Rate
13:30 CAD Participation Rate
13:30 CAD Average Hourly Wages
13:30 CAD Net Change In Employment
15:00 USD Michigan Consumer Sentiment Index Preliminary
18:00 USD Baker Hughes US Oil Rig Count

UK Company Announcements:

N/A

US Company Announcements:

N/A

 

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