Top 5 Things to Watch This Week
Investing.com – Global financial markets will focus on this week’s Federal Reserve policy meeting for greater signs of the U.S. central bank’s likely rate hike trajectory through next year.
Investors will also keep an eye out on a few U.S. economic reports, with Friday’s monthly employment data in the spotlight, to gauge how it will impact the Fed’s view on monetary policy in the months ahead.
Meanwhile, market players will focus on a monetary policy decision from the Bank of England amid expectations for the first interest rate hike in more than 10 years.
In Europe, investors will await monthly inflation data to assess how fast the European Central Bank will start unwinding its asset purchase program.
Elsewhere, traders will pay close attention to a monetary policy decision due in Japan amid speculation the Bank of Japan will lag well behind major global central banks in dialing back its massive stimulus program.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. Federal Reserve Rate Decision
The Federal Reserve is not expected to take action on interest rates at the conclusion of its two-day policy meeting at 2:00PM ET (1800GMT) on Wednesday, keeping it in a range between 1.0%-1.25%.
The central bank will release its post-meeting statement as investors look for any change in language which could point more clearly to a rate hike in the months ahead.
The U.S. central bank is widely expected to raise interest rates again in December and twice next year, according to market analysts who warned that risks were skewed more to a slower pace of hikes because of expectations that inflation will remain low.
A change in regime at the Fed could also affect monetary policy in the months ahead. U.S. President Donald Trump is expected to decide this week who will replace Janet Yellen as Fed chair when her term ends in February.
As of Friday evening, online political market PredictIt pegged Fed Governor Jerome Powell as the big favorite, with a 78% chance of being named to the post. John Taylor, a Stanford University economist widely viewed as the most conservative of Trump’s top candidates, was far behind in second place at 13%.
2. U.S. Employment Report
The U.S. Labor Department will release its October nonfarm payrolls report at 8:30AM ET (1230GMT) on Friday.
The consensus forecast is that the data will show jobs growth of 315,000, bouncing back from a hurricane-related decline of 33,000 in September. The unemployment rate is forecast to hold steady at 4.2%. Most of the focus will likely be on average hourly earnings figures, which are expected to rise 0.2% after gaining 0.5% a month earlier.
This week’s calendar also features reports on ISM manufacturing and service sector growth, consumer confidence, auto sales, ADP private sector payrolls, weekly jobless claims, construction spending, monthly trade figures as well as factory orders.
Meanwhile, for the stock market, investors will digest another heavy week of earnings, with results from market darlings Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) and Tesla (NASDAQ:TSLA) set to garner most of the attention.
On the political front, tax reform will likely be at the back of investors’ minds, as markets look for any new developments on the Trump Administration’s tax bill.
3. Bank of England Policy Announcement
If all goes as scripted, the British central bank will hike borrowing costs for the first time in more than 10 years due to the recent surge in inflation. The consensus is for rise to 0.5% from 0.25%.
However, many economists have warned that the time was not right for a hike as recent data has painted a subdued picture of the economy while uncertainty over how Britain’s withdrawal from the European Union will play out remains.
Besides the BoE, traders will focus on a trio of reports on activity in the manufacturing, construction and services sectors for further indications on the continued effect that the Brexit decision is having on the economy.
Politics is likely to be at the back of investors’ minds, as they keep an ear out for any news regarding the Brexit negotiations.
4. Euro Zone Flash Inflation
The euro zone will publish flash inflation figures for October at 1000GMT (6:00AM ET) Tuesday.
The consensus forecast is that the report will show consumer prices rose 1.4%, slowing slightly from 1.5% in September, remaining short of the European Central Bank’s target of just below 2%. Perhaps more significantly, the core figure, without volatile energy and food prices, is seen holding at 1.1% from a month earlier.
In addition to the inflation data, the euro zone will publish a preliminary report on third quarter economic growth. The region’s economy is forecast to expand 0.6% in the June-Sept. period, equivalent to an annualized 2.1%.
The ECB said last week it would cut its bond purchases in half to 30 billion euros a month from January. However, it hedged its bets by extending asset purchases by nine months given continuously low inflation.
Headlines surrounding the simmering constitutional crisis in Spain between Madrid and Catalonia will remain in focus.
5. Bank of Japan Monetary Policy Decision
The Bank of Japan is not expected to make any changes to its monetary policy at the conclusion of its two-day rate review on Tuesday, as robust exports and private consumption heighten prospects of a moderate economic expansion.
Still, the BoJ is set to largely maintain its current inflation forecasts, blaming stagnant consumer prices on factors such as corporate efforts to boost productivity.
BoJ Governor Haruhiko Kuroda will hold a press conference afterward to discuss the decision. He is likely to remind markets of the BoJ’s resolve to maintain its ultra-easy policy until inflation is sustainably above 2%.