This week, three central banks announce their monetary policy decisions, building momentum for the NFP report scheduled for next Friday. 

January’s last trading day lacks important economic events, but the week ahead is full of macro-data able to move financial markets. No less than three central banks are scheduled to release their monetary policy decisions this week, starting with the Reserve Bank of Australia and ending with the European Central Bank.

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Finally, the NFP report on Friday will tell market participants the shape of the US jobs market. Considering that the Fed sees its price stability mandate fulfilled, further declines in the unemployment rate would pressure the Fed to tighten the monetary policy faster.

Reserve Bank of Australia

The first central bank to present its monetary policy decision this week is the Reserve Bank of Australia. The market expects no change in the cash rate, but the forward guidance is important for the Australian dollar, one of the most oversold currencies in G10 lately.

Bank of England

On Thursday, the Bank of England is expected to hike the interest rate again after December’s surprise rate hike. A 25 basis points rate increase on Thursday would likely support the British pound, although the currency traded on a strong note in January.

European Central Bank

After the Bank of England’s decision, it is the European Central Bank’s turn to communicate its policy to markets. The expectations here are for a no change in the Main Refinancing Rate, but again, the monetary policy statement does matter for currency traders.

In January, the euro had weakened against the US dollar, dropping close to 1.11 before erasing some of the losses last Friday. Because the ECB is in no hurry to raise the rates, unlike the Fed in the United States, bears will likely sell any meaningful bounces.

NFP Report

Last but not least, the NFP report next Friday is key to this week’s price action. The market expectations are that the US economy added 166k new jobs in January and that the unemployment rate remained steady at 3.9%. Any deviation from the forecast, especially for the unemployment rate, would trigger sharp moves in the US dollar.