In what’s set up to be another week of important economic data, Thomas Watts, Investment Analyst, abrdn Portfolio Solutions, shares his weekly heads up on what we can expect to see coming down the tracks this week, including BOJ data tomorrow commenting;
“With a raft of economic data released last week to mull over, there won’t be too much time to digest what financial markets made of it all, as we push into this week,
However, we will be able to see what they’ve been making in China as the National Bureau of Statistics releases its annualised Industrial Production figures today. The numbers should take on an added significance as January’s data, which would usually be made public during February, was not released to eliminate the distortions caused by the seven-day Lunar New Year festival last month. This means we will receive a bumper amount of data, covering changes in production from December to February, charting the change in the total inflation-adjusted value of output produced by manufacturers, mines and utilities from the “workshop of the world”.
Staying in Asia, Japan will draw investor focus on Tuesday, beginning a week characterised by central bank press conferences, as the Bank of Japan (BOJ) announces its latest base rate, as well as giving its views on the factors that affected its most recent interest rate decision, the overall economic outlook, inflation and any clues regarding future monetary policy. Larger than expected pay rises from major Japanese firms have significantly heightened the chance the BOJ conclude its eight years of negative interest rate policy, marking a landmark shift away from its huge stimulus programme. Annual labour talks with major firms concluded with pay rises of 5.28%, the highest in 33 years and far exceeding forecasts of 4.5%, putting pressure on the central bank to react this month, with many expecting a shift to a range of 0-0.1%.
Whilst the foundation has been laid by Asian markets, much of the beginning of the week has been building, certainly for domestic investors, towards UK inflation data, released during the middle of the week. With inflation currently sitting at 4%, twice the Bank of England’s 2% target, we shouldn’t expect those on Threadneedle Street to look to cut rates just yet, but this month’s reading could well settle bets as to whether we should expect any movement on borrowing costs during their June meeting.
Those wondering what the BoE will make of the Wednesday’s data, shouldn’t have too long to wait as the bank will host a press conference the day after, setting rates, whilst giving their views on the domestic economy.
Not to be outdone, the BoE’s US equivalent, the Federal Reserve, will hold a press conference towards the end of the week, announcing where they see the future of interest rates going, as well as giving various other economic projections, as they attempt to set financial markets’ expectations for the coming months. Back in December, a March rate cut in the US looked an almost certainty, however, after various stronger than expected data points, those expectations have been pushed back towards the summer, with June looking the most likely outcome.”
