PMI
Monday marks a bank holiday in the U.S. in observance of Presidents’ Day.
Tuesday will bring attention to Australia with the release of the Monetary Policy Meeting Minutes. However, the most significant event of the day will be the inflation data for Canada.
Wednesday the focus will shift to Australia’s Wage Price Index quarter-on-quarter (q/q), while in the U.S. we await the release of the FOMC Meeting Minutes.
Thursday will bring the Flash Manufacturing PMI and Flash Services PMI reports for Australia, Japan, the eurozone, the U.K., and the U.S. Additionally, Canada will release its retail sales month-on-month (m/m) figures, while the U.S. will get the Unemployment Claims and existing home sales data.
The week will conclude with Eurogroup meetings on Friday.
In Canada, the CPI data is highly anticipated. Analysts suggest that the Bank of Canada’s tightening cycle has likely peaked, but any rate cuts are unlikely to occur before June. In its recent meeting, the Bank of Canada emphasized that while there has been some progress in addressing inflation, there are still lingering risks, and inflation has proven to be remarkably persistent. The focus of the Bank has shifted from determining whether the policy rate is sufficiently restrictive to how long it will need to maintain the current rate.
This week we will see whether the disinflation trend persists. Even so, inflation currently remains above the Bank’s target of 2%, indicating that further data will be necessary before considering rate cuts.
Analysts expect the wage price index q/q for Australia to decrease from 1.3% to 0.9%. The most recent data showed an increase due to rises in minimum wage and CPI indexation. However, analysts from Westpac noted that individual wage bargaining seems to have peaked. Therefore, a moderation is anticipated in this week’s data.
This week’s PMIs for the eurozone will provide further insights into the economy. Inflation has begun to cool down recently, prompting careful analysis by the ECB in order to decide the potential start of interest rate cuts. Although the PMI manufacturing for the eurozone remains in contraction territory, there has been a noticeable improvement in recent months. Similarly, the Services PMI recorded below the 50 level last month, standing at 48.4. Consensus forecasts for this week anticipate improvements, with the manufacturing PMI expected to rise to 47.0 and the services PMI to increase to 48.8. Analysts are anticipating a rate cut from the ECB in April, but there’s a risk it could be pushed to June depending on data.
Recent data indicates that the U.K. likely entered a technical recession in the final quarter of 2023. However, there’s a slightly more optimistic outlook compared to the eurozone, especially evident in the services PMI, which surpassed expectations and showed improvement. This offers hope that the U.K. economy is heading in a positive direction, with prospects for growth in the near future. Analysts at ING suggest that while the Bank of England (BoE) isn’t expected to start rate cuts too soon, key indicators to monitor for timing include services inflation and wage growth.
The consensus anticipates growth in U.S. existing home sales from 3.78 million to 3.97 million. Recent robust data, particularly in inflation, strong job figures, and GDP performance, has led the market to postpone expectations for a Fed rate cut, with the first one now expected in June. While traders will monitor housing data and the leading index, these factors are not expected to significantly impact the market.