UPCOMING EVENTS:
- Tuesday: US Durable Goods Orders, US Consumer Confidence.
- Wednesday: Australia Monthly CPI, Fed’s Waller.
- Thursday: BoJ Summary of Opinions, Australia Retail Sales, Canada GDP, US Final Q4 GDP, US Jobless Claims.
- Friday: US Good Friday Holiday, Japan Jobs data, Tokyo CPI, Japan Industrial Production and Retail Sales, US PCE, Fed Chair Powell.
Tuesday
The US Consumer Confidence is expected to remain unchanged at 106.7 in March. The last report interrupted a three-month positive streak as the data surprised with a big miss to the downside across the board. The commentary highlighted that “while overall inflation remained the main preoccupation of consumers, they are now a bit less concerned about food and gas prices, which have eased in recent months. But they are more concerned about the labour market situation and the US political environment”. The Present Situation Index will be something to watch as that’s generally a leading indicator for the unemployment rate.
Wednesday
The Australian Monthly CPI Y/Y is expected at 3.6% vs. 3.4% prior. The RBA focuses more on the quarterly CPI readings, but the monthly indicator is timelier and can be a guide for the trend, especially at turning points. The Core measures will be more important as that’s what the RBA is more focused on. As a reminder, the RBA dropped the tightening bias in their recent monetary policy decision and we got a strong labour market report soon after. Therefore, unless we get a big downside surprise, the data shouldn’t change much for the central bank and the market’s pricing.
Fed’s Waller will give a speech on the “Economic Outlook” at the Economic Club of New York. Waller is a key FOMC member because he’s been a “leading indicator” for changes in Fed’s policy. He was the first one talking about QT in December 2021 and the first one mentioning rate cuts in November 2023. Given the recent hot CPI reports and the FOMC decision, it will be interesting to hear from him and it’s likely that he will deliver some hawkish comments.
Thursday
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. This is because disinflation to the Fed's target is more likely with a weakening labour market. A resilient labour market though will make the achievement of the target much more difficult. Initial Claims keep on hovering around cycle lows, while Continuing Claims remain firm around the 1800K level. This week, Initial Claims are seen at 215K vs. 210K prior, while there’s no consensus for Continuing Claims at the time of writing although the previous release saw an uptick to 1807K vs. 1820K expected and 1803K prior.
Friday
The Tokyo Core CPI Y/Y, which is seen as a leading indicator for National CPI, is expected at 2.4% vs. 2.5% prior. We got a Nikkei report recently which stated that the BoJ was considering a rate hike in July or October. If we start to get hot inflation data, the market might start to price in a July hike, but the Yen might not appreciate that much if the US data continues to surprise to the upside.
The US PCE Y/Y is expected at 2.4% vs. 2.4% prior, while the M/M measure is seen at 0.4% vs. 0.3% prior. The Core PCE Y/Y is expected at 2.8% vs. 2.8% prior, while the M/M reading is seen at 0.3% vs. 0.4% prior. Forecasters can reliably estimate the PCE once the CPI and PPI are out, so the market already knows what to expect. We might see a miss though as Fed Chair Powell during his Press Conference said this about the February PCE: "We have it well below 30bps on core PCE”.
