Top Things to Watch this Week

This week won’t have the same adrenaline of the past week, but with earnings season still rolling forward we never know if we're gonna have surprises...

Friday’s strong job report in the US helped the dollar break out, and a strong dollar can lead to higher credit spreads.

Now markets have shifted an upcoming interest rate cut in the US from March to May, and changes in those expectations are likely to be the main driver of day to day market swings in the coming weeks.

US: ISM Non-Manufacturing Purchasing Managers Index (PMI)

In the last survey, data showed that the services industry activity rebounded strongly, with new orders recovering and prices paid by businesses for materials rising at a moderate pace. Conversely, the manufacturing PMI contracted for a third month straight, confirming that consumers are switching from spending in goods, which are typically bought on credit.

The services sector accounts for more than two-thirds of US economic activity, so a growth signal indicates the economy continues to expand.

February 6th

Australia: RBA interest rate decision

The Reserve Bank of Australia is expected to keep the benchmark lending rate unchanged at 4.35%. Markets anticipate the RBA will only start cutting interest rates by September, although there's an implied probability of such movement happening as early as June.

The Australian dollar (AUD) has been moving downward and the Australian index (ASX 200) has been moving up despite the negative sentiment coming from neighbouring China.

February 7th

Canada: Balance of Trade (December)

The last report showed Canada’s trade surplus is shrinking with exports falling, on lower motor vehicle shipments and oil prices. For December the deficit is expected to narrow, led by higher goods exports.

US are Canada's main trading partner and last week, the Canadian dollar (CAD) weakened versus the USD, retreating from a three-week high observed on February 1st, pressured by a stronger US dollar and falling oil benchmarks.

Oil prices dropped as the speculation about a potential cease-fire between Hamas and Israel is easing concerns about supply disruptions, and lower oil prices reduce support for the CAD.

February 8th

China: Consumer Price Index YoY (January)

Just before New Year festivities begin, China will publish inflation data. Forecasts are that the deflationary pressures have intensified, in a setting of weak demand, a drifting property sector and fragile investor sentiment.

The upcoming Year of the Dragon - traditionally the luckiest of the 12 animals in this zodiac - sheds some hope as the annual travel rush usually brings some steam for the economy.

February 9th

Germany: Inflation Rate YoY (January)

Recent data revealed that German exports fell more than expected due to weak global demand. This lack of orders in manufacturing is increasingly becoming a burden on Europe's largest economy.

The German economy shrank by 0.3% in 2023, pushed down by persistent inflation, high energy prices and weak foreign demand.

The inflation rate in Germany is expected to be +2.9% in January 2024, its lowest value since June 2021 (+2.4%). Such decrease will hopefully strengthen the argument for an ECB first interest rate cut to happen in April.