A Light Data Day Ahead

March 25, 2024

A Light Data Day Ahead

  • Fed speakers today will likely generate more volatility than second-tier US economic data releases.
  • BOE Mann and ECB Holzmann speak.
  • Threat of FX intervention is offering JPY support.

USD pared back some of its recent solid gains. This week’s economic data load is lighter compared to last week. The US February Personal Income and Outlays report is the highlight (Friday). In Europe, the Riksbank policy rate decision and Monetary Policy Report take centre stage (Wednesday), but we don’t expect major surprises. Please see our Drivers for the Week Ahead for an in-depth look at what markets are facing this week.

Overall, USD can edge higher because we don’t expect the Fed will deliver 75bps of rate cuts this year. The US economic growth outlook is encouraging, financial market conditions are very loose, and the February PCE deflator is expected to remain too sticky for the Fed to cut any time soon. Interestingly, Atlanta Fed President Raphael Bostic (2024 voter) pointed out on Friday he now projects just one interest rate cut “later in the year”, instead of two, as he’s less confident on the trajectory of US inflation.

Second-tier US economic data are released today: February Chicago Fed national activity index (12:30pm London), new home sales (2:00pm London) and March Dallas Fed manufacturing outlook survey (2:30pm London).

Fed speakers will likely generate more volatility: Atlanta Fed President Raphael Bostic (12:25pm London), Chicago Fed President (2025 voter) Austan Goolsbee (1:05pm London), and Governor Lisa Cook (2:30pm London).

Jawboning effort from Japan’s top currency official is offering JPY support. Japan’s vice finance minister for international affairs Masato Kanda warned overnight that “the current weakening of the yen is not in line with fundamentals and is clearly driven by speculation”, adding “we will take appropriate action against excessive fluctuations, without ruling out any options.” The BOJ last intervened to stem JPY weakness between September and October 2022. USD/JPY ultimately peaked at 151.95 on 21 October 2022, and USD/JPY has so far held under this resistance level.

In our view, it’s only a matter of time before USD/JPY makes new cyclical highs in part because we anticipate the BOJ’s policy normalization process will be gradual and brief. Indeed, according to the BOJ Minutes of the January Monetary Policy Meeting “many members expressed the recognition that, given the current outlook for economic activity and prices, it was highly likely that accommodative financial conditions would be maintained even if policy actions such as the termination of the negative interest rate policy were implemented”.

GBP/USD is consolidating a little above its 200-day moving average (1.2592). BOE policy maker Catherine L Mann speaks today at a conference titled “Industry policy: Boon or bane for productivity growth” (2:15pm London). Mann will have an opportunity to explain the reason she switched her vote in favour of a hold at last week’s BOE policy-setting meeting. Mann had consistently voted for a 25bps hike since the August 2023 BoE meeting.

EUR/USD is holding above 1.0800 but faces immediate resistance at its 200-day moving average (1.0839). ECB Governing Council member Robert Holzmann is scheduled to speak today (10:30am London). Holzmann is a hawk and cautioned on several occasions that the ECB cannot rush to ease policy.

AUD/USD is range-bound around 0.6525 as iron ore prices modestly recovery. Australia’s March Westpac consumer confidence index (11:30pm London) will offer a timely update on the household spending outlook. Recall, one reason the RBA dropped its tightening bias last week was because of concerns that “household consumption growth remains particularly weak”.

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