Central banks will keep traders on their toes this week

Central banks

This is a big week for FX traders with four central bank meetings: the Bank of Japan (BOJ) and Reserve Bank of Australia (RBA) will decide on rates on Tuesday, followed by the Federal Reserve (Fed) on Wednesday and the Bank of England (BOE) on Thursday. In Japan, bigger-than-expected pay hikes have raised the chances of action by the BoJ to tighten monetary policy. The RBA is expected to hold its key interest rate at 4.35%. A Reuters poll of economists suggests rate cuts won’t come until September. The Fed is also expected to keep its rates on hold until at least June, but data on the upside could suggest that recent Jerome Powell comments may have been premature. No move is expected from the Bank of England either.

The Bank of England

The Bank of England decision comes in the midst of a few key macroeconomic indicators. On Wednesday, consumer price index (CPI) growth is expected to decelerate to 3.6% in the month of February year-on-year (YoY), up from 4% the previous month. On Thursday, purchasing managers index (PMI) flashed. Little change is expected there. Both manufacturing and service components are seen marginally rising, with the former remaining in contraction territory for a 20th consecutive month and the latter in expansion territory as it has been since November last year. Retail sales data will come after the BOE decision. The index is anticipated to fall by 0.3% in February month-over-month (MoM) after a strong rebound of 3.4% the previous month.

Chinese industrial production and retail sales

In China, industrial production and retail sales beat expectations during the first two months of the year. Factory output rose the most in two years, up 7% in the first two months of the year, above expectations for a 5% increase. Retail sales rose 5.5%, higher than analysts' forecast of 5.2% growth. If economists acknowledge a stabilization of the economic environment in the country, they still fear this could still be a one-off, as consumption may have been temporarily buoyed by lunar year festivities. Investors will be attentive to iron ore prices, hoping they have found a floor, following the latest China industrial production figures.

BHP

Last month, BHP flagged a $2.5 billion impairment charge in relation to the development of its West Musgrave nickel and copper project. Indonesia has aggressively ramped up nickel output in the past year, putting pressure on nickel producers in Australia and other countries. The nickel price is slowly recovering after hitting a two-year low last month. Still, BHP Group continues to assess whether it will put its nickel division on ice. According to BHP CEO David Lamont earlier this morning, 30% of the Australian nickel market has gone offline, and another 30% is under pressure.

Reckitt Benckiser

Here in the UK, look out for Reckitt Benckisershares this morning. The stock fell to an 11-year low on Friday after a jury in Illinois awarded a woman $60 million in damages, saying that Enfamil formula led to the death of her premature baby. This trial is the first of several hundred trials set to come to court. Also under scrutiny is Currys. The stock has now pared most of its gains from last month after JD.com revealed on Friday it would not make an offer on the group. This announcement followed last week's news that Elliott Advisors walked away after they saw another offer rejected.

Oil

oil prices were trading at a four-month high on Monday morning, a level WTI and Brent reached last Friday after the IEA raised its view on 2024 oil demand growth and cut its supply forecast. Last Friday, the Baker Hughes survey showed an increase in the total rig count to 629, matching the six-month high set a couple of weeks ago. This was mostly due to the rise of oil rigs in operation, also at a six-month high.

Cocoa

Is the cocoa market panicking? Cocoa prices have more than doubled over the past year, the result of three consecutive years of poor harvests in Ivory Coast and Ghana, and this coming season is very likely to follow the same path. Prices have risen to a level where top producers in these countries have stopped or cut processing because they can't afford to buy beans. And dealers are now increasingly concerned about tightening supplies. After reaching $7,000 a ton on Thursday for the first time ever, the cocoa price in New York added another 8.5% on Friday to reach $7,760.