Drivers for the Week of March 31, 2024

March 31, 2024
Here's a look at the main drivers in Developed Markets this week.

The dollar put in a mixed performance against the majors last week. CAD, GBP, and AUD outperformed while SEK, NOK, and CHF underperformed. Signs of life in the Chinese economy should help support risk sentiment this week, but we ultimately believe that robust U.S. economic data will keep the dollar rally going.


Fed Powell remained cautious last Friday. Mirroring recent comments from some of his more hawkish colleagues, Powell said “The fact that the US economy is growing at such a solid pace, the fact that the labor market is still very, very strong, gives us the chance to just be a little more confident about inflation coming down before we take the important step of cutting rates.” This is of course a rather long way of asking “what’s the hurry?”

There will be plenty of Fed speakers this week and most are expected to take this cautious view. Cook speaks Monday. Bowman, Williams, Mester, and Daly speak Tuesday. Bowman, Goolsbee, Powell, Barr, and Kugler speak Wednesday. Harker, Barkin, Goolsbee, Mester, Musalem, and Kugler speak Thursday. Barkin, Logan, and Bowman speak Friday.

March jobs report Friday will be the data highlight. Consensus for NFP sees 200k vs. 275k in February, while the whisper number stands at 212k. Unemployment is expected to fall a tick to 3.8%, while average hourly earnings are expected to slow two ticks to 4.1% y/y. Fed Governor Christopher Waller noted recently that the February rise in unemployment “was driven mostly by an outsized rise in the number of 16- to 24-year-olds counted as unemployed. Youth employment tends to be volatile, so this rate may drop back in the next few months and, if so, pull the overall unemployment rate back down as well.” Ahead of NFP, ADP reports its private sector jobs estimate Wednesday and is expected at 150k vs. 140k in February. Of note, NFP has outperformed ADP for the past seven months.

Other labor market data will be reported. February JOLTS job openings will be reported Tuesday and are expected at 8.775 mln vs. 8.863 mln in January. Keep an eye on layoffs and hires. March Challenger job cuts and weekly jobless claims will be reported Thursday.

ISM PMIs will be important too. Manufacturing will be reported Monday and headline is expected at 48.3 vs. 47.8 in February. Prices paid component is expected at 52.9 vs. 52.5 in February and new orders component is expected at 49.8 vs. 49.2 in February. The impact of the Baltimore bridge collapse on trade and commerce could be significant. In the February ISM manufacturing PMI data, supplier deliveries rose to 50.1 vs. 49.1 in January while backlog of orders rose to 46.3 vs. 44.7 in January. Both are the highest since September 2022 and the higher these numbers are, the greater the strains in the supply chains. If both these numbers are impacted by the port closure, this would be a bad sign for inflation going forward. While the drop in the prices paid component to 52.5 in February was welcome news, it remains in inflationary territory. All of these are reasons for the Fed to remain cautious.

Services PMI will be reported Wednesday. Headline is expected at 52.8 vs. 52.6 in February. Keep on eye on prices paid, which fell to 58.6 in February vs. 64.0 in January. This too remains in inflationary territory and will keep the Fed cautious.

Canada highlight will be March jobs report Friday. Consensus sees a 34.3k rise in jobs vs. 40.7k in February, as well as the unemployment rate rising a tick to 5.9%. Recent labor market readings have been solid, validating the BOC’s warning in March that “it’s too early to loosen the restrictive policy.”

March PMI readings will also be important. S&P Global manufacturing PMI will be reported Monday and its services and composite PMIs will be reported Wednesday. Ivey PMI will be reported Friday.

Bank of Canada Q1 business outlook survey will be released Monday. This should offer timely input ahead of the April 10 policy meeting. A rate cut then is unlikely, but June is live with 67% odds priced in. Recall that the Q4 BOC business survey set the stage for the BOC to scrap its cautious tightening bias at the January policy meeting.


Eurozone highlight will be March CPI Wednesday. Headline is expected to fall a tick to 2.5% y/y and core is expected to fall a tick to 3.0% y/y. If so, headline would be the lowest since November and approaching the 2% target. Ahead of that, Germany reports March CPI Tuesday and its EU Harmonised Inflation is expected at 2.4% y/y vs. 2.7% in February.

ECB reports its inflation expectations survey Tuesday. 1-year inflation expectations rose a tick to 3.3% in January but have come down markedly between October and December 2023. 3-year ahead inflation expectations are expected to fall a tick to 2.4% and have remained well-anchored around 2.5%. Interestingly, consumer expectations for nominal income growth remained unchanged at 1.2% in January, dampening the effects on future wage growth and inflation.

The ECB releases the account of its March meeting Thursday. At the March 6-7 meeting, the ECB kept policy interest rates steady but slashed near-term inflation and GDP growth forecasts, paving the way for looser policy settings. The March account will likely show broad agreement to cut rates in June, which is now fully priced in. De Cos Wednesday is the only scheduled ECB speaker this week.

Final March eurozone PMIs will be reported. Manufacturing PMI will be reported Tuesday. Italy and Spain report for the first time and are expected at 48.8 and 51.0, respectively. Services and composite PMIs will be reported Thursday. Italy and Spain report for the first time and their composite PMIs are expected at 52.0 and 54.2, respectively. Both would be an improvement over February.

U.K. highlight will be March DMP survey reported Thursday. 1-year expectations are expected to fall a tick to 3.2%. The BOE will likely pay particular attention to the expectations for future UK wage growth to gain confidence that a sustained slowdown in average regular earnings growth is underway.

Other minor data will be reported. March Nationwide house prices Tuesday are expected to recover further in March, rising 2.4% y/y vs. 1.2% in February. If so, this would be the most since December 2022. The ongoing recovery in housing market activity bodes well for the consumer spending outlook.

February money and credit data will be reported Tuesday. Demand for credit in January pointed to a recovery in consumer spending activity. Net mortgage approvals for house purchases (an indicator of future borrowing) rose 7.2% m/m in January and net consumer credit growth quickened to 8.9% y/y in January, the most since August 2018.

Switzerland reports March CPI Thursday. Headline is expected to pick up a tick to 1.3% y/y, while core is expected to remain steady at 1.1% y/y. Both headline and core inflation are well below the SNB’s 2% target, validating the bank’s dovish surprise cut in March. The SNB projects headline CPI inflation to average 1.2% over Q1. With price pressures remaining low, the market is pricing in nearly 80% odds of another cut in June followed by another one fully priced in for December that would see the policy rate bottom at 1.0%.

Riksbank releases its minutes Thursday. The minutes will offer more details behind the bank’s dovish hold. Recall that the Riksbank left the policy rate at 4.0% and indicated the policy rate can be cut in May or June. The Riksbank also slashed its policy rate forecast in line with money market pricing but cautioned that monetary policy should be “adjusted cautiously going forward, in the form of gradual cuts in the policy rate.” The market is pricing in nearly 80% odds of a cut in May.


Japan highlight will be the Q1 Tankan report Monday. Large manufacturing index fell a point to 11 while the outlook rose two points to 10. Large non-manufacturing index rose four points to 34 while the outlook rose three points to 27. However, large all-industry capex came in at 4.0% vs. 9.8% expected and 13.5% in Q4 and was the weakest since Q1 2023. This is likely to keep the Bank of Japan cautious, especially as other real sector data have come in soft. The market sees 90% odds that the next 10 bp hike comes in September.

RBA minutes will be released Tuesday. The minutes from the March 19 meeting will offer more details behind the RBA’s dovish hold. Recall that the RBA kept the cash rate target at 4.35% but unexpectedly dropped its tightening bias, in part because “household consumption growth remains particularly weak amid high inflation and the rise in interest rates.” The market sees 80% odds of the first cut coming August 6. Assistant Governor Kent speaks Monday and Jones speaks Thursday.

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