UPCOMING EVENTS:
Monday: US ISM Manufacturing PMI.
Tuesday: RBA Policy Decision.
Wednesday: RBNZ Policy Decision, US ISM Services PMI.
Thursday: US Jobless Claims.
Friday: Market Holiday, US NFP.
Monday: The ISM Manufacturing PMI is expected to show a little dip to 47.5 vs. 47.7 prior. The market will have a particular focus on the prices paid and employment sub-indexes. The S&P Global US Manufacturing PMI, which comes out before the ISM one, improved in March which clouds the narrative that the banking woes had a bad impact on the economy. Although it may be too early to see the impacts from the banking “crisis”, a hot number should result in the market repricing rates expectations on the hawkish side and should give the USD strength with a clearer move vs. the JPY . If the data softens, we may see the USD getting under pressure, especially against the JPY.
Tuesday: The expectations for the RBA rate decision are split between a pause and a 25 bps hike. The uncertainty revolves around the dovish tweak to the last RBA monetary policy statement where the central bank changed the reference to “further rate increases” to “further tightening” and Governor Lowe stated that they will consider the data to asses “when and how much further” they need to go on rates. Since then, the inflation data came in softer than expected and PMIs dipped into the contractionary territory, while unemployment rate improved printing at 3.5% vs. 3.6% expected and 3.7% prior.
Wednesday: The RBNZ is expected to hike by 25 bps. The central bank remains resolute in bringing inflation back down to their target and recent speeches by bank members erred on the hawkish side.
The US ISM Services PMI is expected to ease a bit to 54.5 vs. 55.1 prior with prices paid and employment sub-indexes in focus. The S&P Global US Services PMI showed a much bigger than expected improvement and the comments on the inflation part were not encouraging at all. In fact, we saw Treasury yields rallying after the report, carrying USD/JPY higher with them. We should see a repetition of that day’s price action in case the ISM report comes out hot. Of course, in case the data is softer than expected, USD/JPY should be the cleanest pair where to express a short on the dollar.
Thursday: Jobless Claims is the most timelier data we have now on the jobs market after the banking woes in mid-March, so the market will pay close attention to them. Initial Claims are expected at 200K vs. 198K prior, and Continuing Claims are seen at 1697K vs. 1689K prior. Again, the market will take a notable miss as an early hint to deterioration in the labour market and the cleanest move I see would be Treasury yields and USD/JPY lower. On the other hand, another beat should make the yields and the USD/JPY pair to rally.
Friday: Friday is a global market holiday, so it’s really bad to have the NFP report coming out on such a day. Luckily, this report may have less significance for the market since it doesn’t capture the banking sector events and thus may be discredited the next month. Given this premise, I suspect that a hot report may not be as impactful as a cool one because at the moment the market may think that if it’s good it may be bad the next month, but if it’s bad it may be worse the next time. Anyway, the headline number is expected at 238K vs. 311K prior and the unemployment rate is seen unchanged at 3.6%. Average Hourly Earning are expected at 4.3% vs. 4.6% prior for the Y/Y reading and 0.3% vs. 0.2% prior for the M/M one.
This article was written by Giuseppe Dellamotta.