Markets To Turn to U.S. Non-farm Payrolls to Assess March Rate Hike Possibility

U.S. stocks were closed flat on Friday after Federal Reserve President Janet Yellen signaled a faster rate hike this year and likely cement a rate increase at the Fed’s March 14-15 meeting. The Dow Jones Industrial Average closed up 0.01 percent, to 21,005.71, ending the week up 0.9 percent. The S&P 500 gained 0.05 percent, to 2,383.12, finishing 0.7% higher on a weekly basis. Meanwhile, the Nasdaq Composite added 0.16 percent to 5,870.75, edged 0.4 percent higher after one week.

Among 11 sectors making up the S&P 500 index, gains in financial stocks, which benefit from higher rates, were pared by losses in real estate. Speaking at a business luncheon in Chicago, Yellen stated that “The process of scaling back accommodation likely will not be as slow as it was in 2015 and 2016”, implying a more aggressive rate-hike path for 2017. Moreover, she also dropped hints that the central bank might raise rates as soon as this month in case the economy stays on its current track. According to Fed fund futures, the odds of a U.S. March rate hike stands at 90%, up significantly from 40% recorded in the previous week.

This means investors will be closely looking to the U.S. Labor Department’s nonfarm payrolls report for February due on Friday. The data is expected to show a growth of 190,000 jobs after an increase of 227,000 in January. The consensus forecast points to a dip in the unemployment rate. Particularly, the jobless rate may shed 0.1 percent to 4.7%. Meanwhile, average hourly earnings are expected to rise 0.3% after gaining 0.1% a month earlier.

In addition to the employment rate, U.S. economic events also includes data on factory orders, trade figures, ADP private sector nonfarm payrolls, weekly jobless claims and import prices.

Also on Friday, Canada is to publish its monthly employment report.

The euro reversed higher versus the greenback last week, closing the week up 0.64%.  The calendar for the currency will quite quiet next week with all attention likely drawn to the European Central Bank’s latest interest rate decision scheduled on Thursday. As markets are not expecting any change in policy, ECB President Mario Draghi’s press conference 45 minutes after the announcement will be highly awaited.

Besides ECB policy meeting, the Reserve Bank of Australia will also hold announce its latest interest rate decision next week. The RBA is anticipated to keep rates unchanged at the current record-low of 1.50% at its meeting on Tuesday. Australia’s economic data’s calendar will also feature retail sales figures due on Monday.

Australia’s largest trade partner, China, is to release February trade figures on Wednesday, which are expected to show trade surplus narrowed to $25.0 billion last month from $51.4 billion in January. Both exports and imports are forecast to have extended its rally in February. In particular, exports are expected to soared 10.0% in February from a year earlier, following a gain of 7.9% a month ago, while imports are expected to rise 20.3%, after increasing 16.7% in January.


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