Ahead in week’s economic calendar will focus on U.S. employment data on Friday, with hopes for a soft landing. The second quarter begins after Q1’s strong stock performance. The yen and yuan are on intervention watch, while Eurozone and China data are closely monitored.
Non Farm Payroll
The US economy is expected to add 205,000 jobs in March, a slowdown from 275,000 in February. Investors believe the economy is set for a “soft landing” with moderate inflation and avoiding a severe downturn Ahead . The Fed’s March meeting affirmed three rate cuts this year and upgraded its economic growth outlook. Investors will hear from Fed officials, including Chair Jerome Powell, New York Fed President John Williams, San Francisco Fed head Mary Daly, and Richmond Fed head Thomas Barkin.
Investors will hear from Fed officials, including Chair Jerome Powell, New York Fed President John Williams, San Francisco Fed head Mary Daly, and Richmond Fed head Thomas Barkin, before jobs data.
Strong Q2
The US stock market has started strong, with optimism over artificial intelligence stocks and expectations of the Fed cutting interest rates. The S&P 500 recorded its biggest first-quarter gain since 2019. The Fed’s ability to continue this rally into Q2 depends on corporate earnings, which begin in April. The Fed has not yet signaled that inflation has decreased enough to justify a rate cut.
The Fed’s rate cuts are expected to continue into the second quarter, but only three are priced in, and the momentum will depend on corporate earnings starting in April.
Japan and China currencies on watch
Japan and China are on high alert as their currencies weaken due to the strong dollar. The yen is falling towards 152 per dollar and the yuan is struggling to break above 7.2 per dollar. Officials are stepping up efforts to bolster their currencies, with Japan implementing verbal warnings and China’s state banks buying and selling yuan and dollars.
Japan and China have implemented verbal warnings and state banks buying and selling yuan and dollars, suggesting Beijing could have become more tolerant of a weak yuan to maintain competitiveness.
Eurozone inflation data
Eurozone inflation data for March is expected to be closely monitored, with speculation suggesting the European Central Bank is preparing to cut rates in June. The high inflation in the euro area needs to fall further for the ECB to deliver a summer rate cut. If inflation surprises, rate cut bets may be pushed out. ECB Governing Council member Robert Holzmann suggested lowering key interest rates before the Fed.
China’s Economic data
China’s manufacturing activity expanded for the first time in six months in March, providing relief to policymakers amidst a property sector crisis. Expectations for Monday’s Caixin manufacturing PMI show slight expansion, with mixed outlook for the world’s No.2 economy. Policymakers face persistent economic sluggishness since COVID curbs were abandoned, amid housing crisis, local government debts, and weak global demand.
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Investors await Tuesday’s U.S. inflation data to gauge Fed interest rate cuts, with February’s consumer price index expected to rise 0.4% after a faster increase of 0.3% in January.
Fed Chair Jerome Powell indicated that a rate cut may be appropriate this year, but he and his team are not yet prepared. Market observers will also be examining February’s retail sales data, which is expected to rebound 0.8% after a similar decrease a month earlier.
The economic calendar also features updates on industrial production, consumer sentiment and weekly data on initial jobless claims.
Fed officials will be entering the traditional blackout period ahead of their upcoming meeting next week.
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