Week ahead: RBA and BoC rate decisions bring monetary clarity ahead of Fridays’ US jobs report

Monday

ECB President Lagarde appearance

Today sees ECB president Lagarde speak in Paris, with markets likely to be on the lookout for any particularly dovish tones in the wake of the recent 2.4% eurozone inflation figure. Markets are currently pricing a first rate cut in April, but that could change given the weak economic outlook and proximity to 2% inflation. Look out for any significant indications over the timing and speed of the easing process next year.

Tuesday

RBA rate decision

The RBA rate decision looks to bring potential volatility for the Australian dollar, although markets are currently pricing a 96% chance that we see the bank retain their cash rate at 4.35%. Nonetheless the RBA stands out owing to the possibility of another potential rate hike in the coming months. The pricing for such a move has changed over the past week, with a hike by March shifting from being a majority view, to a 36% possibility. That shift came thanks to the recent decline in Australian inflation, falling from 5.6% to 4.9%. With that in mind, markets will be keeping a close eye out for any fresh indication over whether Bullock deems this latest inflation reading as being sufficient to lessen RBA calls for further tightening.

Wednesday

Bank of Canada rate decision

The Bank of Canada rate decision provides a key insight for a central bank that has been widely touted as a frontrunner for the first to cut rates in 2024. Markets are currently expecting that first cut to occur as early as March, pricing in a 60% chance that we see rates cut by at least 25 basis points. Markets currently attach a 15% chance that we see the bank cut rates this month, although the base case is a third consecutive rate hold. Whether the BoC decided to cut rates or not, markets will be keeping a close eye out for associated commentary as we seek greater guidance over the timing and pace of easing in 2024.

Friday

US jobs report

Friday’s jobs report provides a fresh update for US economy, with any signs of economic weakness likely to be deemed fresh cause for the FOMC to take on a more dovish stance. Last month saw a surprise collapse in the nonfarm payrolls figure falling to a two-year low of 150K.  Markets appear undecided where payrolls will move in November, with some calling for an even lower figure. That indecision will be key to driving volatility, with the direction of the November figure telling markets whether last month was a one-off, or indicative of something more troubling within US economy. Also keep an eye out for the latest average hourly earnings, with continued downside helping to allay fears around underlying inflation pressures.