U.S Non Farm Payrolls & RBA Meeting In Focus After BOJ Shocks Yen Higher

At an important meeting on monetary policy held last week, the Bank of Japan surprised the markets by deciding that there shall be no more stimulus for the economy in the near future. This shock announcement disappointed investors counting on a continual policy of further monetary easing by the central bank. The deposit rate was left unchanged at -0.1% – the negative rate adopted by the bank in January. After the decision, the Japanese yen, which seems to have taken on the role of a safe-haven asset, witnessed a sharp rally against its peers.

Ending its two-day meeting on April 27th, the Federal Reserve stated that the interest rate was left unchanged as economists’ had forecast. The central bank is now expressing caution on the path to further rate hikes, due to weak economic data, reflecting  continuing risks of a slowdown. The dollar index DXY, which measures the value of the greenback against a basket of major currencies, edged down for five consecutive days, and closed the week at 93.02, only 40 points above its one-year lows.

New Zealand’s official cash rate was also left unchanged at 2.25% by the Reserve Bank of New Zealand on Wednesday, continuing record levels of low interest rates. However, Governor Graeme Wheeler commented that to ensure an inflation rate around the 2% target, further policy easing might be carried out, if required. A rate cut in June is expected.

According to data released on Friday, EU annual inflation, which was at zero in March, was estimated to stand at -0.2% in April, as the decline in energy prices weighed on inflation. The seasonally-adjusted unemployment rate in March, reported by Eurostat on April 29th, recorded the lowest reading since August 2011- down to 10.2% from 10.4% in the previous month. The reading indicated a slight recovery in the EU labour market.

In Friday’s trading session, oil prices hit the highest levels since the beginning of 2016 thanks to a weakening dollar and expectations of a supply-cut. The global benchmark Brent reached its best monthly gain in seven years, finishing April trading at $47.41 per barrel. Gold also surged up during the week ended April 29 with the last settlement of $1292.84/oz, up 4.86% from the open price early this week.

The upcoming week is a busy one. PMI readings from China and the UK will be released early in the week. China’s economy is expected to improve further. The Caixin manufacturing PMI is anticipated to increase to 49.9 in April, compared with the reading of 49.7 in March. Meanwhile, the UK PMI for April, which is out on Tuesday, is expected to rise to 51.3, 3 points higher the previous reading.

Attention shall be focussed on US non-farm payrolls. The NFP report is scheduled to be released on May 06 with an expected reading of 200,000 new jobs to have been created in April. This compares with 215k jobs created in March. The unemployment rate is expected to remain unchanged at 5%. The US labor market is now considered to be in a stable situation.

Employment data from New Zealand is also on the cards. Employment change (q/q) for the first quarter in 2016 is expected to stand at 0.6%, compared with the reading of 0.9% in the previous period. The unemployment rate(q/q), is expected to be higher at 5.5% , compared to 5.3% for the previous quarter.

On Tuesday, the Reserve Bank of Australia will hold a meeting on monetary policy, investors are expecting the rate to be left unchanged at 2%.

Canada’s trade balance will be published on May 04, with an expected reading of $1.2 billion deficit for February. This would be a slight recovery from a deficit of $1.9 billion reported for January 2016.

Leave a Reply

Your email address will not be published. Required fields are marked *