It will be a busy week ahead with many economic events to look out for, but it will start with a relatively quiet day on Monday.
On Tuesday, BoJ Gov Ueda will speak at the FIN/SUM 2024 event in Tokyo and the U.S. will publish the ISM Services PMI.
Moving on to Wednesday, things will pick up with the GDP q/q in Australia, the ADP Non-Farm Employment Change and JOLTS job openings in the U.S., and several releases in Canada: The Labor productivity q/q, the BoC Rate Statement, the overnight rate and the BoC press conference.
Fed Chair Powell is due to present the Semi-Annual Monetary Policy Report before the House Financial Services Committee in Washington.
On Thursday, we will get the ECB monetary policy announcement and the U.S. unemployment claims. Fed Chair Powell will testify again on the Semi-Annual Monetary Policy Report, but this time before the Senate Banking Committee.
Canada will publish the employment change and unemployment rate on Friday and the U.S. will release its average hourly earnings m/m data, the Non-Farm employment change and the unemployment rate.
Some FOMC members are scheduled to deliver their remarks throughout the week.
The consensus for the U.S. ISM Services PMI is to drop from 53.4 to 52.9. Since the beginning of the year, the index has surprised to the upside together with many other U.S. economic indicators. However, a notable increase in the prices paid sub-index in January hinted that despite overall economic growth, price pressures still exist.
For this week’s reading analysts expect a moderation in the ISM Services PMI especially since the S&P Global Services PMI and the New York Fed’s Services Business Activity have also registered declines in February. Wells Fargo expects the index to drop at 53.2.
In Canada, no surprises are expected at this week’s BoC meeting and the Bank is likely to keep monetary policy unchanged at 5%. As a reminder, at the last meeting the Bank had a less hawkish tone than expected, but members stressed that they don’t believe inflation will return to the desired target of 2% until next year. The BoC is unlikely to start signalling rate cuts any time soon as it needs to see continued signs of inflation dropping.
A lot of attention will be on Jerome Powell’s testimony in Congress this week and some volatility is expected in the markets as a result. The focus will be on what he says about the future of monetary policy and if he hints anything about rate cuts, though until now the Fed’s message to the markets has been that more data is needed.
The ECB is expected to keep its monetary policy unchanged at this week’s meeting, but the market will watch for potential changes in the Bank’s language and any hints on future rate cuts. Inflation has cooled down in the euro area lately and economic activity remains weak, but there is uncertainty regarding wages and the services inflation in particular seems to be more resilient. The market expects the ECB to start cutting rates in June because until then we will have more data to assess if inflation is on a sustainable path towards to reach the desired target of 2%.
The consensus for the employment change in Canada is a drop from 37.3K to 20.0K, while the unemployment rate is expected to rise from 5.7% to 5.8%. Adding 20.0K new jobs will not be enough to keep the unemployment rate from rising as the hiring demand is not keeping up with the big supply of workers.
For the U.S. the consensus is for the average hourly earnings m/m to rise by only 0.2% compared to the previous 0.6%. The non-farm employment change is expected to drop from 353K to 190K and the unemployment rate is anticipated to remain unchanged at 3.7%.
There are signs the labor market is cooling, but it’s still holding up for the moment. Analysts from Wells Fargo believe the jobs market lost some momentum in February as hinted at by a small rise in jobless claims. The expected decrease in average hourly earnings will likely reflect a normalization of supply and demand for workers.