U.S. employment data on Friday, the testimony of Federal Reserve Chairman Jerome Powell, and a meeting of the European Central Bank

Jobs Report

Investors will be closely watching Friday's monthly employment report to determine when the Federal Reserve will lower interest rates for the first time. June is presently the target month as bets are placed on the central bank's ability to provide a soft landing for the economy.

Investors may find it more difficult to ignore worries that an economy performing better than anticipated might spark inflation if the Fed starts easing too soon if there are signs of the labour market's ongoing strength.

In February, the economy is predicted by economists to have gained 190,000 jobs, following January's record-breaking 353,000 gain—the biggest increase in years. It is anticipated that the unemployment rate will remain at 3.7% and that wage growth will have slowed.

Eurozone

Investors are waiting to see if ECB officials will reiterate that it is too early to talk about rate reduction during their meeting on Thursday. The ECB is not expected to make any policy adjustments.

Although ECB policymakers have toned down their discussion of rate cuts, saying they need more proof that inflation is headed back towards the 2% objective, markets are still expecting Frankfurt to start reducing rates later this year, with a first step anticipated in June.

Friday's inflation numbers for the eurozone seemed to confirm the ECB's cautious approach. In February, consumer price inflation decelerated less than anticipated, and the rate of underlying inflation likewise reduced more slowly than anticipated.

The main concern of the ECB is that wage inflation is still too strong and might prolong price pressures.

Market Rally

February saw advances for the Dow, S&P 500, and Nasdaq for the fourth consecutive month, mostly due to growth forecasts in artificial intelligence (AI), which has also helped semiconductor companies.

Both the Nasdaq and the S&P 500 ended at all-time highs on Friday. The Nasdaq achieved an intraday record as well as a second consecutive closing record, breaking its previous top of 16,212.23, which was set in November 2021.

Indications that the economy is still strong despite high interest rates have also helped the markets.

Powell Talks

Investors might hear from Fed Chair Jerome Powell in his semiannual hearing on monetary policy before a House committee on Wednesday and a Senate panel on Thursday, ahead of Friday's jobs report.

Powell is anticipated to restate that given recent statistics indicating the health of the economy and ongoing pricing pressure, officials would continue to take a cautious approach in determining when to start cutting interest rates.

Given the ongoing pricing pressures in the American economy, Richmond Fed President Thomas Barkin stated on Friday that it is premature to determine when the central bank would be able to start reducing its benchmark interest rate.

(Sources: investing.com, reuters.com)