The dollar put in a mixed performance against the majors last week. JPY, EUR, and NOK outperformed while the dollar bloc underperformed. Despite strong data and Fed repricing in its favor, the dollar is struggling to get any upside momentum. This week brings major data points, Fed Beige Book and plenty of Fed speakers, which are likely to be dollar positive. Market expectations have largely converged with the FOMC’s projections for 75 bp of cuts in 2024. However, if the data continue to come in firm, we see scope for Fed expectations to adjust even higher in favor of the dollar. Of note, one well-respected analyst is now calling for no Fed cuts this year.

AMERICAS

February jobs data Friday will be the data highlight. Consensus sees a 200k rise in NFP vs. 353k in January as the labor market comes into better balance. However, Bloomberg’s whisper number stands at 209k. The pace of wage growth, a key driver of core services CPI inflation, will also generate a lot of attention. Average hourly earnings are expected to slow to 4.3% vs. 4.5% in January. Ahead of the jobs data, ADP reports its private sector jobs estimate Wednesday and is expected at 150k vs. 107k in January.

Other important labor market data will be reported this week. January JOLTS data will be reported Wednesday, with opening expected at 8.890 mln vs. 9.026 mln in January. Keep an eye on layoffs and hires. February Challenger job cuts and weekly jobless claims will be reported Thursday.

ISM services PMI Tuesday will be important too. Headline is expected at 53.0 vs. 53.4 in January. Keep an eye on employment and prices paid. Of note, S&P Global’s preliminary February services PMI came in at 51.3 vs. 52.3 expected and 52.5 in January and so there are downside risks to the ISM reading.

Q1 growth estimates have been marked down but remains solid. The Atlanta Fed’s GDPNow model is tracking Q1 growth at 2.1% SAAR and will be updated Wednesday after the data. Elsewhere, the New York Fed’s Nowcast model is tracking Q1 growth at 2.3% SAAR and will be updated Friday. Its first Q2 growth estimate should be released this week.

The Fed’s Beige Book report will be released Wednesday. This is being prepared for the upcoming March 19-20 FOMC meeting. Since the last meeting January 30-31, the data have come in firm and so the Beige Book is expected to show once again the US economy remains in a healthy state. In the January Beige Book, Districts indicated that expectations of their firms for future growth were positive, had improved, or both.

There will be plenty of Fed speakers too. Harker speaks Monday. Barr speaks Tuesday. Powell, Daly, and Kashkari speak Wednesday. Powell and Mester speak Thursday. Williams speaks Friday. At midnight Friday, the media embargo goes into effect and there will be no more Fed speakers until Chair Powell’s press conference March 20.

Bank of Canada meets Wednesday is expected to keep rates steady at 5.0%. At the previous meeting January 24, the BOC made no policy changes but removed the language that it was prepared to “raise the policy rate further if needed,” presumably because of the sluggish growth outlook. Since then, inflation eased a bit more in January than the BOC projected, while Q4 GDP growth was much better than the BOC had penciled in. As such, the post-meeting statement will likely remain balanced and continue to support market pricing for 75 bp of easing in 2024, mostly likely beginning June 5. Updated macro forecasts won’t come until the April 10 meeting.

Canada data highlight will be February jobs data Friday. Consensus sees 20.0k jobs added vs. 37.3k in January, with the unemployment rate seen rising a tick to 5.8%, which would match the cycle high. Clearly, labor market conditions have eased. Job vacancies have returned to near pre-pandemic levels and new jobs are being created at a slower rate. However, average hourly earnings have been sticky above 5% y/y since July, which is too high relative to productivity growth.

February PMI readings will also command attention. S&P Global services and composite PMIs will be reported Tuesday. Ivey PMI will be reported Wednesday.

EUROPE/MIDDLE EAST/AFRICA

The two-day European Central Bank ends Thursday. The bank is widely expected to leave the policy rate at 4% and reiterate its plan to reduce reinvestment from maturing securities purchased under the PEPP over the second half of the year and discontinue them at the end of 2024. The ECB is also expected to slash its growth and inflation forecasts. The economy unexpectedly stagnated in Q4, and inflation figures have recently been below the ECB’s predicted levels, suggesting a faster than anticipated disinflationary process.

ECB President Christine Lagarde’s post-meeting press conference will be key. Her comments will be scrutinized for any hints about the timing and scope of future interest rate cuts. Lagarde has indicated that borrowing costs could be lowered from the summer, noting the eurozone Q1 wage numbers will be important for the ECB’s policy assessment. The eurozone Q1 indicator of negotiated wage rate is scheduled to be released on May 23, two weeks before the June 6 policy meeting. January PPI will be reported Tuesday and is expected at -8.1% y/y vs. -10.6% in December.

Final February services and composite PMIs will be reported Tuesday. Italy and Spain report for the first time and their composite PMIs are expected at 51.5 and 52.0, respectively. If so, both would be significant improvements over January.

Germany reports some key January data. Trade data will be reported Wednesday. Exports are expected at 1.5% m/m vs. -4.2% in December, while imports are expected at 2.0% m/m vs. -6.5% in December. Factory orders will be reported Thursday and are expected at -6.0% m/m vs. 8.9% in December. IP will be reported Friday and is expected at 0.6% m/m vs. -1.6% in December. Data are likely to confirm that Germany remains the weak link in the eurozone.

U.K. Chancellor of the Exchequer Hunt delivers his spring budget Wednesday. He is widely expected to announce pre-election tax cuts. Market participants should pay close attention to the updated fiscal projections, specifically the change in the cyclically adjusted primary deficit. Wider deficits (or looser fiscal stance) over the forecast horizon could further delay the start of a BOE easing cycle and would help underpin GBP.

Bank of England reports its February Decision Maker Panel survey Thursday. 1-year inflation expectations are expected at 3.0% vs. 3.4% in January. If so, this would be the low for the cycle but still above the 2% target. The market still sees the first cut coming August 1.

Switzerland reports February CPI Monday. Headline is expected at 1.1% y/y vs. 1.3% in January. If so, it would be the lowest since September 2021. Of note, inflation has been running under the 2% target since June 2023, leaving plenty of room for the SNB to ease policy. We expect the SNB to cut the policy rate by 25 bp at its March 21 meeting, while the market sees nearly 60% odds of a cut then.

ASIA

Japan data highlight will be February Tokyo CPI Tuesday. Headline is expected at 2.5% y/y vs. 1.8% in January, while core (ex-fresh food) is also expected at 2.5% y/y vs. 1.8% in January. If so, this would be the first acceleration in core since October and would move back above the 2% target. Of note, core ex-energy is expected at 3.1% y/y vs. 3.3% in January. A pickup in inflation would likely raise the likelihood of an earlier start to liftoff than June currently priced in.

Bank of Japan views on liftoff remain varied. Last week, board member Takata said the 2% inflation target was coming into sight, but Governor Ueda pushed back against this and said he did not yet see a sustainable and stable achievement of that target. We do not expect the BOJ to tip its hand explicitly, but it does seem likely to wait until the spring wage negotiations are completed before hiking rates. Governor Ueda speaks Tuesday while board member Nakagawa speaks Thursday.

January cash earnings data Thursday will also be important. Nominal earnings are expected at 1.3% y/y in January vs. 0.8% in December, while real earnings are expected at -1.5% y/y vs. -2.1% in December. The Bank of Japan is closely monitoring whether a virtuous cycle between wages and prices will intensify before shifting away from looser policy settings. So far annual wage growth has remained subdued, suggesting the BOJ is unlikely to rush with policy normalization. This could further weigh on the yen.

January current account data Friday will be of interest. An adjusted surplus of JPY2.074 trln is expected vs. JPY1.810 trln in December. However, the investment flows will be of more interest. The December data showed that Japan investors turned net buyers of U.S. bonds (JPY622 bln) for the fourth time in five months. Japan investors turned net buyers (JPY40 bln) of Australian bonds again and remained net sellers of Canadian bonds (-JPY82 bln) for the sixth straight month and for ten of the past eleven months. Investors turned net buyers of Italian bonds (JPY11 bln) again. Overall, Japan investors turned total net buyers of foreign bonds (JPY1.084 trln) for the fourth time in five months. With Japan yields likely to move higher in 2024, it’s possible that Japan investors will stop chasing higher yields abroad but it’s still too early to say for sure.

Australia highlight will be Q4 GDP data Thursday. Consensus sees growth 0.3% q/q (1.4% y/y) vs. 0.2% (2.1% y/y) in Q3. The risks are skewed to the upside because of higher retail sales and private capex volume growth. As background, the RBA expects Australia’s economy to have expanded at an annual pace of 1.5% in Q4 2023. The Q4 GDP print is unlikely to trigger a meaningful shift to Australian interest rate expectations because the RBA is more concerned with high inflation, particularly in services. Q4 current account data Wednesday and January trade data Friday will also be closely watched.

New Zealand highlight will be Q4 manufacturing acti.vity Friday. Retail sales contracted -1.95 q/q in Q4 and so similar weakness in manufacturing activity would all but guarantee another contraction in GDP in Q4. RBNZ tightening expectations have evaporated and markets are pricing in the first cut in October, with over 70% odds that it begins even earlier in August