Last week, U.S. employment data for February came in much stronger than expected with a gain of 295,000 jobs for the month. But the showing raised concerns that the Fed will hike rates sooner than expected, perhaps as early as June.
And although the Bank of Canada has held the line on rates after a surprise quarter-point cut in January to contain the economic damage from the collapse in oil prices, many analysts think the bank could cut again, perhaps in April.
"We know that they are in data-watching mode," said Andrew Pyle, a portfolio manager at ScotiaMcLeod in Peterborough, Ont.
"Next week is an important week because you have housing starts coming out. You have new home prices out. You have all these things, not to mention you have an employment report. I think there is a lot of direction for the TSX simply because it’s going to answer some questions on the Bank of Canada side."
Economists are forcecasting that the Canadian economy likely lost about 5,000 jobs in February, following a gain of 35,000 jobs in January. And housing starts are expected to come in at an annualized pace of about 190,000 for February, little different from the six month average of 189,000.
In the U.S., the major events of the week are the release of February retail sales data on Thursday. Economists expect sales rose 0.4 per cent during the month following a 0.8 per cent drop in January.
Investors will also take in the latest reading from the widely-watched University of Michigan consumer confidence survey.
The TSX finished lower last week, down 1.85 per cent with mining and financial stocks being the major contributors to the slide, as a largely desultory earnings season came to a close with an earnings miss from the Bank of Nova Scotia (TSX:BNS).
"It wasn't a great earnings season (but) it wasn't a disaster," said Pyle, who added that investors were somewhat positively surprised by bank earnings as four of the six big banks beat estimates.
"For a lot of people, it was like here we go again with another bad quarter and that wasn't the case."
By the same token, many earnings from the energy patch were worse than expected as oil companies scrambled to adapt to a world where crude prices are less than half what they were last summer.
But Pyle doesn't think those companies will weigh on the TSX quite as much in the near future.
"Oil seems to be stabilizing," he said.
"As long as we‘re out of the woods in terms of further declines, then Toronto has room here to extend."
Crude prices have tumbled 40 per cent alone since the end of November but seem to have settled around the US$50 a barrel mark for the time being.
Meanwhile, Greece will again be in focus on Monday as eurozone finance ministers meet to discuss whether the country gets its next instalment of bailout money.
The meeting, known as the eurogroup, will discuss how much progress Greece has made since it sent the ministers a list of reforms late last month to win a four-month extension on the European part of its international bailout.
Greece is quickly running out of cash and has to repay debts this month to the International Monetary Fund — which co-funded Greece's 240 billion euro bailout — as well having treasury bills coming due.