Week ahead: UK Budget day, ECB meeting and NFP

Here are the week’s key events:

The UK’s Budget Day could herald changes to taxation but also new measures to boost investment in the stock market. The European Central Bank is expected to remain on hold but could signal when it wants to cut. US inflation will be crucial to expectations for when the Federal Reserve may follow suit.

Monday: Japan Inflation Data Release

The Japanese yen could get some attention early in the week with the latest Tokyo core CPI inflation data. Last week Japan's core consumer inflation slowed for a third month in January, though it topped expectations.

Core CPI slid to 2.0% from 2.3% in December but the Bank of Japan is still expected to begin normalising policy in April. It’s still the base case but the more inflation slows the harder the BoJ will find it to move on time. Swiss inflation data and German import prices will also be watched by the market.

Tuesday: Eyes on Bank of Japan

Hot on the heels of the inflation report from Japan we hear from Bank of Japan Governor Ueda, who is walking a fine line towards normalising policy this spring. Whilst his remarks that a country where prices are up 2% is experiencing inflation seem mundane, there is more to it.

Japan has entered a technical recession, which makes rate hikes a hard sell for some. Watch his words carefully. Meanwhile, the Caixin services PMI for China is due up, whilst the US ISM services PMI is up in the North American session.

Earnings:  NIO (NIO), CrowdStrike (CRWD)

Wednesday: UK Budget Day

Budget Day in the UK – watch for new forecasts on borrowing and tax cuts that could affect gilts and sterling. Also, anything designed to boost investment in UK equities could affect the FTSE.

Meanwhile, Fed chair Jay Powell begins a two-day testimony about monetary policy before the House Financial Services Committee – an event usually closely followed by market participants for clues about where the FOMC may go next. All that matters to the market it seems is the timing of the first rate cut and how far they expect to go with policy easing.

Meanwhile, the Bank of Canada’s latest decision on interest rates is expected to see policymakers leave the rates on hold. The Fed’s Beige Book, Australian GDP figures and the monthly JOLTS job openings data will also be scrutinised.

Earnings:  JD.com (JD)

Thursday: European Central Bank Meeting

The European Central Bank left rates on hold at its January meeting and pushed back against chatter about early rate cuts. "All in all, members signalled that continuity, caution and patience were still needed," the ECB’s minutes of the meeting said. "There was broad consensus among members that it was premature to discuss rate cuts at the present meeting."

And it would be a big shift were the ECB to change tack this week. "While the initial inflation shock had largely reversed, the task that lay ahead was the reversal of second-round effects, which might prove to be more stubborn," the ECB said. However, it does seem likely that the ECB will adopt a slightly more dovish outlook by opening the door to a potential cut in the summer.

Earnings:  Broadcom (AVGO), Costco (COST), DocuSign (DOCU)

Friday: Jobs Day in the U.S.

Jobs Day: January’s jobs report saw payrolls booming, wages surging and unemployment falling. Will the February report convey a similar message of underlying strength in the labour market that belies some other indicators – for example, that all the jobs being added are part-time and that the average workweek fell to 34.1 hours. 

Nevertheless, the strength of the headline numbers ensures the Fed will be cautious about cutting too soon. More strength in February would support the wait-and-see narrative that has seen expectations for rate cuts this year significantly dialled down.

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