The Reserve Bank of Australia (RBA) interest rate decision will be one of the major economic events this week. Some market analysts suggest that the RBA will raise borrowing costs, following the example set by the US Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England (BoE).
Eurostat is expected to publish data regarding retail sales in the euro bloc during January, with economists waiting to see how high inflation figures have influenced consumer demand. In the UK, preliminary Q4 2022 GDP data will give a glimpse of how the UK economy performed in the last quarter as the government is urged to control elevated living costs.
RBA board to decide on interest rates
On Tuesday February 7th, the Reserve Bank of Australia (RBA) is expected to announce its interest rate decision. Economists polled by Reuters forecast that Australia’s central bank will raise rates by 25 basis points for the fourth time in a row. Most economists said that the RBA could hike rates by 0.25% once more in its March 2023 meeting.
Commenting on the RBA’s monetary policy, Westpac’s economists noted that we expect that the Board will leave its options open in the Governor’s Statement after the February meeting to allow scope to raise rates at the March meeting. A central bank is unlikely to pause when there the evidence of demand pressures and firms seizing some pricing power associated with rising services inflation as we saw in the December inflation report.
According to a report published on January 25th, ING’s economists seem to agree, suggesting that the RBA is hiking the cash rate by 25bp a meeting, and we do not believe this will change. We now believe they will have to keep hiking for at least another two meetings, taking the peak cash rate up another 50bp to 4.1%.
Eurozone retail sales in January likely to have dropped
On Monday February 6th, Eurostat will release its eurozone December retail sales report. Market analysts forecast a 2.0% drop on a month-to-month basis and a 2.8% fall on an annualised basis.
The mild winter in Europe and the improved consumer sentiment didn’t seem to help the German retail sales in December as they tumbled by 5.3% on a monthly basis even though a Reuters poll had indicated a 0.2% increase.
Has China’s CPI inflation accelerated in January?
The National Bureau of Statistics (NBS) in China is expected to release its CPI inflation report for January 2023. Economists forecast an increase to 2.3% on a year-to-year basis, accelerating when compared to the 1.8% figure recorded in December 2022.
Speaking to CNN Business on January 27th, market analysts suggested that the reopening of the world’s second-largest economy could boost global inflation as prices for fuel, industrial metals and food could be pushed up. According to an NBS report, China’s consumer price index rose by 2% year-on-year in 2022, well below the central bank’s target of around 3%.
ONS to publish preliminary UK GDP data
On February 10th, economists will have the opportunity to scrutinise the Q4 2022 GDP preliminary data published by the Office for National Statistics (ONS). Forecasts indicate a 0.3% increase on a quarterly basis and a 2.1% rise on a year-to-year basis.
According to the Bank of England’s forecast, the UK’s GDP is not expected to reach pre-pandemic levels before 2026. The BoE’s policymakers have suggested that the UK can no longer sustain a growth rate of 1% per year without generating inflation.
As the cost of living continues to put pressure on households, the International Monetary Fund predicts that the economy of the United Kingdom will contract (-0.6% in 2023) and perform more poorly than other advanced economies, including Russia.
Statistics Canada to release unemployment rate report
Statistics Canada will publish its January unemployment rate survey, which is expected to show that the rate remained unchanged at 5%. The Bank of Canada’s (BoC) Governor Tiff Macklem said in a press conference (Jan. 25) that part of rebalancing demand and supply in the economy is rebalancing the labour market.
Canada’s central bank has raised interest rates eight times in a row. The BoC’s governing board noted that it would put its monetary policy tightening on hold. However, the BoC’s policymakers stressed that they are ready to raise borrowing costs more if inflation doesn’t drop.
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