Week Ahead: Central Banks, Geopolitics, Earnings and NFP

Fundamental analysis of Forex market

Last week, the FOMC met and Powell delivered a hawkish press conference which turned up the fire under already volatile markets.  Not to be overlooked, the Bank of Canada set the table for a rate hike in March as well.  This week, markets will hear from the RBA, BOE, and ECB.  The RBA is expected to be less dovish while the BOE is expected to remain hawkish.  The ECB seemingly is on its own as the only remaining major central bank to be dovish.  Also, Russia and Ukraine will continue to be in the news as both NATO and Russia build up forces on the border.  After stellar earnings from AAPL last week, markets will get earnings results from GOOG, AMZN and FB this week.  All eyes will be on the guidance.  And don’t forget about NFP on Friday!

BOC and the FOMC

Both the BOC and the FOMC laid out scenarios which are leading markets to believe that rate hikes will come at their respective March meetings. Tiff Macklem, BOC Governor, said that the “output gap has been closed” while Fed Chairman Jerome Powell said that the FOMC is of the mind to raise rates at the March meeting.  In addition, Powell noted that “we are not making progress on the supply chain issue” and that he sees risk of inflation staying higher for longer than expected.  Both central bank leaders sounded more hawkish than their respective statement during their press conferences.


The RBA will likely end its $350 billion quantitative easing (QE) bond buying program and bring forward its rate hike guidance towards the first half of 2023. The central bank previously said that they will not raise rates until inflation is sustainably within the 2% to 3% target range. Although it may turn less dovish, it’s stance contrasts the interest rate market, which is currently pricing rates lift-off in April and a further three rate hikes by December 2022.

The BOE meets on this week as well. Markets are pricing in a 100% chance of a hike at its meeting this week.  In addition, the BOE should give guidance towards unwinding its balance sheet, which it said it would begin once rates are at 0.50%.

Finally, the ECB also meets this week.  Christine Largade and friends have been extremely dovish as of late.  Lagarde recently said that the ECB has “every reason not to react as quickly” as the Fed.   At its last meeting, the ECB said they will continue buying bonds until at least Q3 2022 under the Asset Purchase Program.  (The PEPP program will expire in March). Note that the EU releases Preliminary January CPI data on Wednesday, the day before the meeting.


After meetings last week between Russia, France, Germany, and Ukraine, Russia agreed to reconvene talks in two weeks.  Russia’s Lavrov said Russia doesn’t want war and agreed to meet with the US Bliken in a few weeks.  This should give the opposing sides opportunity to hash out an agreement for what Russia feels is a security threat.  However, Russian forces continue to build at the border and US General Milley has even gone on to say that “given the Russian forces arrayed against Ukraine, if unleashed would be very significant and horrific”! It seems though that talks will continue for the next few weeks before any type of “occurrence” takes place.


Earnings season continues to roll on. The most important aspect to note from many of the companies that have reported so far is that earnings seem to be “in-line” with analyst estimates.  With the expectation of AAPL, markets were disappointed and the volatility in the after-hours markets showed it!  Could we expect more of the same this week?  GOOG, AMZN and FB are some of the bigger names to report this week.  Others are as follows:   BABA, GOOG, AMD, PYPL, XOM, SBUX, GM, QCOM, SPOT, ATVI, AMZN, F, FB

Economic Data

Despite the week long Chinese New Year this week, China will report PMI data over the weekend.  Also, the day before the ECB meeting, the EU will release its preliminary January CPI report.  On Friday, the US and Canada will both release Employment data. Other major economic events (in addition to the central bank meetings) are as follows:


  • China: NBS Manufacturing PMI (JAN)
  • China: NBS Non-Manufacturing PMI (JAN)
  • China: Caixin Manufacturing PMI (JAN)


  • Japan: Retail Sales (DEC)
  • Japan: Industrial Production Prel (DEC)
  • Japan: Consumer Confidence (JAN)
  • Japan: Housing Starts (DEC)
  • EU: GDP Growth Rate Flash (Q4)
  • Germany: CPI Prel (JAN)
  • Canada: PPI (DEC)
  • US: Chicago PMI (JAN)


  • Global: Manufacturing PMIs Final (JAN)
  • New Zealand: Trade Balance(DEC)
  • Japan: Unemployment Rate (DEC)
  • Australia: Retail Sales Prel (DEC)
  • Australia: RBA Interest Rate Decision
  • Germany: Retail Sales (DEC)
  • UK: Nationwide Housing Prices (JAN)
  • Germany: Unemployment Change (JAN)
  • UK: BOE Consumer Credit (DEC)
  • UK: Mortgage Approvals (DEC)
  • EU: Unemployment Rate (DEC)
  • US: ISM Manufacturing PMI (JAN)
  • US: Construction Spending (DEC)


  • New Zealand: Employment Change (Q4)
  • Australia: RBA Chart Pack
  • Australia: RBA Governor Lowe Speech
  • EU: CPI Flash (JAN)
  • EU: PPI (DEC)
  • US: ADP Employment Change (JAN)
  • Crude Inventories


  • OPEC Meeting
  • Global: Services PMIs Final (JAN)
  • UK: BOE Interest Rate Decision
  • EU: ECB Interest Rate Decision
  • US: Unit Labour Costs Prel (Q4)
  • US: NonFarm Productivity Prel (Q4)
  • US: ISM Non-Manufacturing PMI (JAN)
  • US: Factory Orders (DEC)


  • Australia: RBA Statement on Monetary Policy
  • Germany:Factory Orders (DEC)
  • EU: Retail Sales (DEC)
  • Canada: Employment Change (JAN)
  • US Non-Farm Payrolls (JAN)
  • Canada: Ivey PMI s.a. (JAN)

Chart of the Week: Weekly US 2 year yields

Source: Tradingview, Stone X

With Fed Chairman Powell so hawkish at the FOMC press conference last week, it’s not a surprise that short-term yields have taken off!  For the week, US 2 year yields moved in a range from 1.037% to 1.228%, closing near 1.172%.  This is the highest level since the pandemic began in 2022.  On the weekly timeframe, the short-term yield was halted at the 38.2% Fibonacci retracement level from the highs of November 2018 to the pandemic lows, near 1.202%.  US 2 year yields also closed above long-term resistance at 1.145% for the week.  Horizontal resistance sits above at 1.388% then the 50% retracement from the recently mentioned timeframe at 1.541%. The 61.8% Fibonacci retracement level is the next resistance, at 1.88%.  Below, yields can fall to the round number support level of 1.00%.  Additional horizontal support below is at 0.731%.

Central Banks will dominate headlines again this week.  The BOE and the RBA are expected to be on the hawkish/less dovish side while the ECB is expected to still remain dovish.   Any changes to those expectations should move markets.  In addition, pay attention to the Russia/Ukraine headlines.  If it appears more likely that Russia will invade Ukraine, the Ruble and the Euro may move lower.  Any earnings surprises could also move markets.  Be ready for more volatility this week!

Have a great weekend.