UPCOMING EVENTS:
- Monday: Switzerland CPI.
- Tuesday: Tokyo CPI, China Caixin Services PMI, Eurozone PPI, US ISM Services PMI.
- Wednesday: Australia GDP, Eurozone Retail Sales, US ADP, BoC Policy Decision, US Job Openings, Fed Chair Powell Testimony.
- Thursday: Japan Wage data, Switzerland Unemployment Rate, ECB Policy Decision, US Jobless Claims, Fed Chair Powell Testimony.
- Friday: US NFP, Canada Labour Market report.
Monday
The Switzerland CPI Y/Y is expected to fall further to 1.1% vs. 1.3% prior. The last report missed expectations by a big margin and sparked a strong dovish reaction with the market pricing a 60% chance of a 25 bps rate cut in March. Another miss should seal the rate cut this month, but even if it beats, it shouldn’t change much for the market.
Tuesday
The Tokyo Core CPI Y/Y, which is seen as a leading indicator for National CPI, is expected to rise to 2.5% vs. 1.6% prior. Inflation in Japan has been falling steadily and it’s now basically at target (excluding the ex-energy/food measure). Nevertheless, the BoJ is solely focused on wage growth and the spring wage talks will dictate their policy. BoJ’s Takata recently said that the momentum is rising in wage talks and that the achievement of the 2% inflation target is getting in sight. That sparked a strong reaction in the market with the Yen rallying across the board before giving back most of the gains.
The US ISM Services PMI is expected at 53.0 vs. 53.4 prior. The recent US S&P Global Services PMI surprisingly missed expectations with the commentary noting that “services output held its positive momentum, consistent with a positive change in new business, although the pace of growth fell to a three-month low. In the meantime, service providers continued to increase their headcounts. Still, the pace of hiring slowed as the downtrend in sales growth drove companies to grow cautious of slowing orders. On the price front, cost inflation faced by firms waned during the period, but service providers continued to increase their output charges.
Wednesday
The BoC is expected to keep interest rates steady at 5.00% with the market expecting the first rate cut in June. As a reminder, the central bank dropped the tightening bias at the last meeting and the recent economic data suggests that the BoC is likely to keep everything unchanged and maintain its patient stance. Therefore, this particular meeting should be a non-event.
The US Job Openings are expected to fall to 8.895M vs. 9.026M prior. This will be the first major US labour market report and, although it’s old (January data), it’s generally a market moving release. The market will likely focus on the hiring and quit rates as they both fell below the pre-pandemic trend recently.
Fed Chair Powell will testify to Congress and, as always, market participants will be attentive to any view or hint about the monetary policy trajectory. The text is generally released before the testimony so that will be scanned for clues or “bias”, but the market will also be focused on the Q&A session following the opening remarks.
Thursday
The Japanese Average Cash Earnings Y/Y will be a data point to watch given the BoJ’s sole focus on wage growth. The last month, the data missed forecasts rising by 1.0% Y/Y vs. 1.3% expected and 0.2% prior. The attention though remains on the spring wage negotiations but the easing in inflation might help to bring real wages into positive territory.
The ECB is expected to keep the deposit rate unchanged at 4.00%. The central bank members continue to support a patient stance and the consensus is to wait for the Q1 2024 wage data before considering a rate cut in June, which is also the current market’s expectation. The recent data supports the ECB stance as the Eurozone CPI beat expectations and the labour market remains historically tight.
The US Jobless Claims continue to be one of the most important releases every week as it’s a timelier indicator on the state of the labour market. Initial Claims keep on hovering around cycle lows, while Continuing Claims remain firm around cycle highs. There’s no consensus at the time of writing but the last week Initial Claims came at 251K vs. 210K expected and Continuing Claims at 1905K vs. 1874K expected.
Friday
The US NFP report is expected to show 200K jobs added in February vs. 353K in January and the Unemployment Rate to remain unchanged at 3.7%. The Average Hourly Earnings Y/Y is expected at 4.4% vs. 4.5% prior, while the M/M measure is seen at 0.3% vs. 0.6% prior. The Average Weekly Hours are expected to rise to 34.3 vs. 34.1 prior. The last report surprised the markets with a huge beat with the only bad readings in the household survey showing the second consecutive drop in employment and the average weekly hours falling sharply to recessionary levels, which also skewed the average hourly earnings print.
The Canadian Labour Market report is expected to show 20K jobs added in February vs. 37.3K in January and the Unemployment Rate to tick higher to 5.8% vs. 5.7% prior. The focus will also be on the wage growth figure as that’s what the BoC is more concerned with.
