Big Week, Big Preview!
Powell Holds Court
The Week Ahead
Well here we go again! Strap in, because things are about to get a little more exciting.
Fed Chair Jerome Powell is set to deliver his semi-annual report to Congress on the state of the economy. He will testify before the Senate Banking Comittee (Tue), and the House Financial Services Committee (Wed). Then we come to the main data event with US Nonfarm Payrolls on Friday.
Aside from that, we’ve got US factory orders on Monday and JOLTS job openings on Tuesday. These are lower-impact events but still with potential to move the dollar if the numbers come in far from consensus.
Powell’s two days at Capitol Hill will draw attention from lawmakers as more tightening would increase the odds of pushing the US economy into recession during the key pre-election year. Traders will look for any cues that Powell is flipping back toward a more hawkish stance in light of the recent strong economic data.
Stay tuned til the end of this newsletter for a BIG PRE-ANNOUNCEMENT!
Economic Calendar
Highlights
- Factory Orders (durable + non-durable) – Monday
- Fed Chair Powell Testimony – Tuesday – Wednesday
- JOLTS Job Openings – Wednesday
- Nonfarm Payrolls + unemployment rate – Friday
Breakdown
Factory Orders – Monday
New orders for US manufactured goods are expected to have contracted once again in January, following an increase of 1.8% month-over-month in December of 2022. If instead we get a positive number, that could add some strength to the US dollar as it would be seen as inflationary.
Fed Chair Powell Testimony – Tuesday – Wednesday
As mentioned in the intro, Jay Powell will be the main focus for investors in the early portion of the trading week. His comments or hints toward potentially larger Fed Funds rate increases at the next meetings will be key.
Investors will also seek to understand how the latest inflation and jobs numbers have altered his projected path. This will give more clarity on the soft vs hard landing scenarios.
What we currently know:
- Almost all FOMC participants agreed that it was appropriate to raise the target range for the federal funds rate by 25bps at the first monetary policy meeting of 2023, although a few officials favored raising it by 50bps (Source)
- All participants continued to anticipate that ongoing increases would be appropriate until data provided confidence that inflation was on a sustained downward path to 2%, which was likely to take some time (Source).
JOLTS Job Openings – Wednesday
Job openings increased to 11.0 million in December 2022. This was the most in 5 months, beating market expectations of 10.25 million. Wednesday’s report will be coming out at the same time Powell is set to start speaking, so we can expect an uptick in volatility around that time. Current expectations for January are 10.6M, which would only be a slight cooldown.
Nonfarm Payrolls + Unemployment Rate – Friday
This report will be watched closely by central bankers, economists, and investors for indications on the direction of the US economy.
If the economy cools down enough to threaten corporate profit forecasts, or reheats and pushes up inflation, more Fed action may be required.
The labour market has been stronger than expected, and a combination of tight labour market and robust wages could signal the Fed to go higher for longer.
January non-farm payrolls showed an addition of 517,000 jobs, which blew away consensus and was the highest amount since July. This was enough to cause some panic for investors who will now be hoping for a downward revision to the January figure.
Consensus for February is +200k jobs and unemployment holding at 3.4%. Wage pressures are also important and if average hourly earnings come in above expectations, that will add fuel to the Fed rate hike fire.
Earnings
Earnings season is winding down. Here’s the list for this week.
March Seasonality for Bitcoin
March has a tendency to be rather uneventful for BTC, with each year aside from 2013 posting a slight gain or loss. This tells us to expect more ranging price action and to be use caution on larger price moves.
Sponsors Corner
Our newsletter sponsor RoseonX have been teasing about an upcoming airdrop. You’re going to want to read this thread if you’d like a piece of the action!
Recently, DEX airdrops have been very successful and in my opinion, that will continue for some time. However, the ones building on Arbitrum should have particularly robust upside.
Pre-Announcement
The Birb Nest is working on a passion project and it may or may not involve free hoodies! Pay close attention, because quantities will be very limited! Make sure to follow The Birb Nest Twitter and turn on notifications!
Jay Charles
Editor in Chief, The Trading Tank.
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