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Forex Outlook: BoC & Japan Rate Decisions, US NFP, & Harbour Energy FY 22

The week ahead in forex is a busy one on the global radar. But first, there’ll be some key data for investors to digest as the inflation rate continues ravaging different countries’ economies.

Bank of Canada Rate Decision

The first important data to be released next week is the rate decision from Canada on Wednesday, March 8th. In the previous meeting held in January, the Bank of Canada decided to pause interest rate hikes after the last 0.25% hike took the benchmark to 4.5%.

The bank indicated that it would only pause the hikes if inflation decreased, and the decision was considered hasty. However, the CPI has dropped to 5.9% in the country. Despite this, core prices remain sticky at 5%.

Consumer spending has held up well in the last few months, and January payrolls saw a huge jump of 150k, with the majority of the dataset being in full employment. The participation rate also increased to 65.7%, significantly from the previous 65.4%. There are no expected changes to the monetary policy; however, some hawkish guidance could come.

Bank of Japan Rate Decision

The Bank of Japan (BoJ) is preparing to appoint Kazuo Ueda as the new governor, replacing the dovish Haruhiko Kuroda. However, Ueda has remained neutral on the possibility of policy changes, and most analysts expect very few changes to the monetary policy.

Analysts anticipate that Kuroda will start laying the groundwork for rate hikes in the coming months as he chairs his last weekly meeting. The country’s inflation is currently above 4.3%, and analysts believe it will continue to escalate. Therefore, it is challenging to envision a scenario where the bank will be comfortable with this trend, and the possibility of rate hikes is becoming a reality for Japan.

US Non-farm Payrolls

The January boom in payroll numbers was a catalyst in changing the general perception of the US economy. The market’s reaction is evident in bond yields, while equity markets continue to hold onto the belief in a decline in further rate hikes.

However, the strength of the economic data has cast a shadow of doubt on this perception. In just one month, we have moved from a narrative of rate cuts to an imminent pause in the next few months to how many rate hikes we will endure in 2023. The next week’s payroll report could reinforce the latter if the job growth continues throughout the month.

It should be noted that no one is expecting a 517,000 increase any time soon, and there could be huge revisions from March onwards. The rate of unemployment dipped to 3.4%, the lowest since 1969. However, there are signs that people are returning to the workforce, with participation rising to 64.2%, the highest level since 2019.

Harbour Energy FY 22

The UK government’s decision has been bad for the energy company, which has seen a slide in its stock price from over 520p in April 2022 to 270p in February 2023. This company is the largest domestic producer, upping UK energy security to over 5% of the current output.

With high gas prices in 2023, the company’s annual revenue is set to rise sharply. However, the total Capex for 2023 is expected to come in at $1 billion, down from over $1.3 billion, due to a decision not to pursue North Sea exploration.

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