UPCOMING EVENTS:
- Monday: Japan Wage data, Swiss Unemployment Rate.
- Tuesday: US NFIB Small Business Optimism Index.
- Wednesday: Japan PPI, RBNZ Policy Decision, US CPI, BoC Policy Decision, FOMC Minutes.
- Thursday: China CPI, ECB Policy Decision, US PPI, US Jobless Claims.
- Friday: New Zealand Manufacturing PMI, New Zealand Retail Sales, UK GDP, UK Industrial Production, US University of Michigan Consumer Sentiment.
Monday
The Japanese Average Cash Earnings Y/Y are
expected to rise to 3.0% vs. 2.0% prior. The JPY might get bid on a strong
figure as the BoJ continues to see the achievement of their inflation target
and mentioned that another rate hikeis dependent
on the data. The timing for such a
move remains uncertain though with July and October being on the table,
although the latter is the most probable one. Overall, even if we see a
beat, the market will likely want to wait for the US CPI on Wednesday as that
is what will likely decide the USD trend for the following days and weeks.
Japan Average Cash Earnings YoY
Wednesday
The RBNZ is expected to keep the OCR
unchanged at 5.50%. As a reminder, the central bank dropped
the tightening bias in the last policy
decision stating that interest rates will need to remain at restrictive level
for a sustained period of time. There’s nothing to expect from this week’s
decision as the RBNZ is looking to normalise policy in 2025 while the
market sees the first cut coming in August.
RBNZ
The US CPI Y/Y is expected at 3.4% vs.
3.2% prior, while the M/M measure is seen at 0.3% vs. 0.4% prior. The Core CPI
Y/Y is expected at 3.7% vs. 3.8% prior, while the M/M reading is seen at 0.3%
vs. 0.4% prior. This is probably one of the most important inflation reports
of 2024 as the recent data has already hit the Fed’s confidence and another
hot release will likely trigger a change in the near-term policy outlook,
especially following a good labour
market report on Friday.
Fed’s
Waller recently said that he wanted to see
a couple of good reports to consider a rate cut in June, so we just need
this week’s report to be hot to make the market to price out the June cut.
This will most likely have big repercussions on the markets with Treasury
yields and the US Dollar rallying and the stock market correcting lower. On the
other hand, a cold report should trigger the opposite reaction with the stock
market hitting new highs and the Treasury yields and the US Dollar coming under
pressure as the risk-on sentiment ensues.
US Core CPI YoY
The BoC is expected to keep interest rates
unchanged at 5.00%. Their policy decision comes right after a weak labour
market report on Friday where we saw
job losses and the unemployment rate jumping to 6.1% from the prior 5.8%
figure. StatCan said that the spike in the unemployment rate is tied to an
additional 60,000 people looking for work or on temporary layoff in March as
the agency reported recently that population growth hit its fastest rate since
1957.
The central bank is also focused on wage
growth and unfortunately for them, the rate increased again to 5.1% from the
prior positively revised 5.0% rate. On the positive side, the latest inflation
report missed expectations across the board
with notable easing in the underlying inflation measures. This puts the central
bank in a difficult position although they should have enough reasons to start
leaning more dovish. The market expects the first rate cut in June.
BoC
Thursday
The ECB is expected to keep interest rates
unchanged at 4.00%. The central bank will likely set the stage for the June
rate cut as policymakers have been touting such a move for quite some time
and we even got the uber-hawk Holzmann joining the team recently. The latest Eurozone
inflation report missed expectations for
both the Headline and Core measures although the M/M readings were both very
high and Services inflation got stuck at 4% since November 2023. Nevertheless,
the data before the June decision will have the final word as the ECB is also
waiting for the Q1 2024 wage data to give it a bit more confidence.
ECB
The US PPI Y/Y is expected at 2.3% vs.
1.6% prior, while the M/M measure is seen at 0.3% vs. 0.6% prior. The Core PPI
Y/Y is expected at 2.3% vs. 2.0% prior, while the M/M reading is seen at 0.2%
vs. 0.3% prior. The data will come after the US CPI report, so it’s unlikely
to see it changing whatever trend will be set by the CPI release.
US Core PPI YoY
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
could make the achievement of the target more difficult. Initial Claims
keep on hovering around cycle lows, while Continuing Claims remain firm around
the 1800K level. Initial Claims are expected at 215K vs. 221K prior, while
there’s no consensus at the time of writing for Continuing Claims although last
week we saw a decrease to 1791K vs. 1810K prior.
US Jobless Claims