Drivers for the Week of March 10, 2024

March 10, 2024
Here's a look at the main drivers in Developed Markets this week.

The dollar was weaker across the board against the majors. JPY, GBP, and AUD outperformed while CAD, CHF, and EUR underperformed. The dollar is likely to remain on its back foot until the U.S. data come in a bit firmer, as last week’s dovish surprise from Powell along with the mixed jobs data undercut the greenback.


The double whammy of Powell and mixed jobs data is likely to carry over to this week and weigh on the dollar. Recent US economic data releases have not been strong enough to justify a material upward adjustment to Fed policy expectations. That along with Powell’s dovish comments last week seemed to confirm market pricing for a June cut. Furthermore, the market is now back to pricing in 100 bp of total easing this year after briefly matching the Fed’s 75 bp guidance.

February inflation data take center stage this week. CPI will be reported Tuesday. Headline is expected to remain steady at 3.1% y/y, while core is expected to fall two ticks to 3.7% y/y. Of note, the Cleveland Fed’s inflation nowcast model shows February headline and core at 3.1% and 3.7%, respectively. For March, the model shows headline and core at 3.3% and 3.7%, respectively. PPI will be reported Thursday. Headline is expected at 1.2% y/y vs. 0.9% in January, while core is expected to fall a tick to 1.9% y/y.

There are no Fed speakers this week. Due to the media embargo ahead of the March 19-20 FOMC meeting, the next Fed speaker will be Chair Powell at his post-decision press conference March 20. Powell gave the markets a little parting gift last week when he said “We’re waiting to become more confident that inflation is moving sustainably at 2%. When we do get that confidence - and we’re not far from it - it’ll be appropriate to begin to dial back the level of restriction.” With the quiet period in effect, it is very unlikely that market expectations of Fed policy will shift materially ahead of the FOMC decision.

February retail sales data Thursday will be important. Headline is expected at 0.8% m/m vs. -0.8% in January, while ex-autos is expected at 0.5% m/m vs. -0.6% in January. The so-called control group used for GDP calculations is expected at 0.4% m/m vs. -0.4% in January. It appears that most share our sentiment that January weakness was largely weather-related, as February is expected to bounce back rather nicely.

University of Michigan reports March consumer sentiment Friday. Headline is expected to rise two ticks to 77.1. 1-year inflation expectations are expected to pick up a tick to 3.1%, while 5- to 10-year expectations are expected to pick up a tick to 3.0%. The Fed won’t be happy to see expectations remain so sticky.


The monthly U.K. data dump begins. Labor market data will be reported Tuesday and conditions continue to ease to some degree, but not by enough to justify looser policy settings. The unemployment rate is expected to remain steady at 3.8% for the three months ending in January, which is below the Bank of England’s medium-term equilibrium level of around 4.5%. Average weekly earnings (ex-bonuses) are expected to remain steady at 6.2% y/y, while total earnings are expected to fall a tick to 5.7% y/y. The BOE estimates annual private sector regular earnings growth of 5.7% over Q1.

Real sector activity is up next. January GDP, IP, services, construction, and trade will all be reported Wednesday. GDP is expected at 0.2% m/m vs. -0.1% in December, IP is expected flat m/m vs. 0.6% in December, services is expected at 0.2% m/m vs. -0.1% in December, and construction is expected at -0.1% m/m vs. -0.5% in December. The improvement in the composite PMI points to some upside risks to these numbers.

Bank of England reports February inflation expectations Friday. The BOE will continue to monitor measures of short and longer-term inflation expectations to ensure they ease closer to the 2% target. Mann speaks both Monday and Tuesday. Recall that she continued to dissent (along with Haskel) at the February 1 meeting in favor of a 25 bp hike.

Markets are still digesting last week’s European Central Bank decision. The market is pricing in less than 20% odds of a cut April 11, but this becomes fully priced in for June 6. Holzmann speaks Tuesday. Cipollone and Stournaras speak Wednesday. De Cos, Schnabel, Guindos, and Stournaras speak Thursday. Vujcic and Lan speak Friday. While the doves may push for an April cut, Lagarde and the hawks are in control and June seems most likely.

The eurozone data calendar is limited. January IP will be reported Wednesday and is expected at -1.7% m/m vs. 2.6% in December. The weak manufacturing PMI is indicative of a contraction in industrial production in January. Spain reports January retail sales Monday while Italy reports sales Friday.

Norway reports February CPI Monday. Headline is expected to remain steady at 4.7% y/y, while underlying is expected to remain steady at 5.3% y/y. If so, headline inflation would remain well above the 2% target and would remain consistent with the Norges Bank guidance that “the policy rate will likely be kept at 4.50% for some time ahead.” Macro forecasts won’t be updated until the next meeting March 21, but the December forecasts indicated that the policy rate will stay at 4.5% until Q3 2024 before gradually moving down. However, the market sees a 60% probability of a 25 bp rate cut over next six months.

Sweden reports February CPI Thursday. Headline is expected at 4.7% y/y vs. 5.4% in January, CPIF is expected at 2.8% vs. 3.3% January), and CPIF ex-energy is expected at 3.6% vs. 4.4% in January. If so, CPIF would partially reverse last month’s spike but would remain above the 2% target. At the last policy meeting February 1, the Riksbank delivered a dovish hold. It kept rates steady at 4.0% but warned that “the policy rate probably can be cut sooner than was indicated in the November forecast.” The market sees over 75% odds of a 25 bp rate cut over the next three months. The Monetary Policy Report containing updated forecasts will be published at the next meeting March 27.


Japan highlight will be Q1 BSI survey Tuesday. Conditions improved modestly over the course of 2023 but ongoing softness in the data so far in Q1 warn of some downside risks to the BSI readings. Despite this, the market is expecting Bank of Japan liftoff in June, though odds of a March move remain elevated near 65%.

Revised Q4 GDP data will be reported Monday. The economy is expected to have grown 0.3% q/q vs. the preliminary -0.1% contraction. The expected improvement is due largely to business spending, which is seen at 2.4% q/q vs. -0.1% preliminary. With the economy showing signs of slowing, one should expect investment to slow in the coming quarters.

Australia reports only minor data this week. The February NAB business survey Monday will offer a timely update on the growth outlook. The NAB business survey currently points to softer growth ahead as business conditions eased to a two-year low in January. RBA Assistant Governor Hunter participates in a panel discussion Monday.

Reserve Bank of New Zealand Chief Economist Conway speaks about the February Monetary Policy Statement Wednesday. We don’t expect new policy guidance from Conway. The next meeting is April 10, and no change is expected then as the market is pricing in the first cut in August.

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