*Please note; The author is working from UTC +13 when determining the timeline of data releases.
Will the Non-Farm Payrolls (NFP) move the market this week? Or, has its importance been shifted to the side in the mind of investors and traders, especially as huge new global events draw the world's attention? Of course, I am speaking of the Russian invasion of Ukraine that began at the end of last week and has caused an extreme amount of volatility in the forex, commodity, and stock markets. With no diplomatic resolution in sight, the Russian/Ukrainian war is expected to continue to have an outsized impact on these markets.
Nevertheless, the US Federal Reserve will be watching the NFP figures with interest as they always do and folding the results into its justification to hike interest rates moving forward. As such, investors and traders should be keeping a cursory eye on the values, alongside developments in Ukraine.
The Federal Reserve is almost guaranteed to hike interest rates in its March meeting, its first in the post-pandemic inflationary environment. What isn't guaranteed is how much the Fed will hike. On the table are 25 basis points and 50 basis points. The NFP may impact the Fed's choice between these two options.
ADP Employment Change FEB
Leading up to the big NFP data release, we will have the precursor ADP Employment Change report for February to digest.
Last month’s data surprised the market when it reported a cut of 300K jobs in the private sector (vs an expected gain of 200K jobs). This month’s report may rebound with an expected 350K jobs added to the private sector
Non-Farm Payrolls FEB
Contrary to the ADP Employment Change report, the NFP reported a gain of 470K jobs in January.
The NFP For February is expected to report a 450K job gain. Combining an extraordinary Non-Farm Payrolls beat with other data points regarding the US economy recently might be the impetus the Federal Reserve needs to consider a 50-basis point hike seriously. Alarmingly, US producer prices rose 1% over January, the largest rise over the past twelve months, and lifted US PPI to 9.7% YoY
Traders should brace for a volatile week ahead as the world starts its road to recovery. The 17th day of protests continues for the killing of George Floyd, with the United States seeing spikes in Coronavirus cases. In comparison, New Zealand has no Coronavirus cases as is fully removes Coronavirus restrictions, while Japan, Korea, the United States, and Australia prepare for a potential second wave. Currently, the world approaches 7.53 Million Coronavirus cases, with 421k deaths. Here is your week ahead.
All dates are at NZDT.
With the FED leaving rates unchanged at 0.25% alongside promising low rates until at least 2022, Chairman Jerome Powell sent dovish signals to the markets. Both speeches this week should mirror each other, with both speeches possibly being market movers concerning the USD and the major indices. With an increase in outbreaks in individual states, a second wave is definitely on the table for the United States. This is in contrast to Anthony Fauci stating that the “US may not see a second wave” and President Donald Trump insisting that “[the government] are not going to close the country” if there is a second wave.
With citizens experiencing a fairly non-restrictive Coronavirus period, Australia has had similar results to New Zealand without an extreme lockdown. However, with random Coronavirus cases popping up in sporadic places, with protests increasing the likelihood of the spread of the Coronavirus, it is not clear whether their method prevails. Futhermore, Australia plans to lift virus curbs by the end of July. Analysts expect a relatively coordinated speech at the RBA meeting minutes conference, backing the RBA’s decision to keep rates at 0.25%. Furthermore, analysts predict an increase in unemployment to 7%, from 6.2%.
With Tokyo reporting 47 new Coronavirus cases, Japan is preparing for a second wave of the Coronavirus. Facing pre-Coronavirus issues such as an aging population and slowing GDP alongside an increase in unemployment, analysts predict a change from -0.1% rate currently; however, uncertainty plagues the decision.
With one of the worst fatality rates in the world, the UK is likely to be struck in the next couple of months with regards to consumer spending and unemployment. Furthermore, Prime Minister Boris Johnson has been touting a 10% unemployment rate by Christmas rate not seen since the 1930s. CPI growth is set to fall to 0.5% from 0.8% as consumers restrict their spending due to the Coronavirus.
The second wave will likely dictate the course of the market in the next following weeks. Therefore, investors and traders should specifically be cautious on the upcoming US data in the week ahead, as flares up in Coronavirus cases have been slowly increasing.