Monday starts quietly, with no significant economic events scheduled for the FX market. For now, the key focus remains on developments about the conflict in Iran.
The only other event of note on Monday is Fed Chair Powell’s participation in a moderated discussion at Harvard University in Massachusetts, which will include audience questions. While it is not expected to move markets, it remains worth watching for any noteworthy comments.
On Tuesday, the Eurozone will release inflation data, while the U.S. will publish JOLTS job openings and Conference Board consumer confidence. Canada will also report its GDP m/m.
Wednesday brings U.S. data including ADP employment change, retail sales m/m, and the ISM manufacturing PMI. Canada will release the BoC Summary of Deliberations.
On Thursday, attention will turn to U.S. unemployment claims and Friday the focus will be on average hourly earnings m/m, the non-farm employment change and the unemployment rate.
It is also worth noting that banks will be closed in many European countries, Canada and other parts of the world due to the Good Friday holiday, which could result in lower liquidity and more irregular market volatility.
Several FOMC members are expected to deliver remarks throughout the week and don’t forget that the daylight saving time change has happened in Europe this weekend.
Inflation data for the eurozone is expected to come in stronger, driven by rising energy prices, which could complicate the ECB’s goal for inflation to move toward a more favorable range.
The ongoing conflict in the Middle East has intensified price pressures, with its effects building throughout the month. However, as the situation is still evolving, it remains unclear how these dynamics will be reflected in the data.
Some analysts expect the ECB to begin raising rates later this year, but it is still too early to draw firm conclusions.
In Canada, the consensus for GDP m/m is 0.0%, compared with 0.2% previously. Following modest growth in December, the Canadian economy appears to have lost some momentum.
This slowdown is largely due to temporary disruptions in the auto sector and weaker housing-related activity, partly driven by severe weather. However, strong energy output and resilient consumer spending have helped cushion the impact.
RBC analysts note that early data points to a partial rebound in February, as auto production normalizes and consumer spending remains firm. Manufacturing and wholesale activity are also showing signs of recovery, although housing is likely to remain subdued.
Overall, Q1 growth is still expected to be modest, with improvements in February and March offsetting the weak start to the year. On the external side, Canada’s trade deficit is projected to narrow, supported by recovering auto exports and higher oil prices, with further improvement likely if energy markets remain elevated.
From a monetary policy perspective, the BoC’s upcoming summary of its March decision is expected to reinforce a broadly balanced stance, suggesting that the current policy rate is appropriately set while officials monitor incoming data. However, the details may provide further insight into how concerned policymakers are about renewed inflation pressures, particularly from higher energy costs.
The consensus for U.S. retail sales m/m is 0.4% versus -0.2% previously, while core retail sales m/m are expected to print 0.3% vs. 0.0%.
The main driver of this week’s data is likely to be strong auto purchases in February, although the broader outlook remains less encouraging. Elevated energy costs are expected to weigh on consumers’ disposable income, potentially limiting spending on non-essential goods despite the boost from vehicle sales.
In the U.S., the consensus for average hourly earnings m/m is 0.3% vs. 0.4% previously. Non-farm payrolls are expected to rise by 56K, following a -92K print, while the unemployment rate is projected to remain unchanged at 4.4%.
Recent indicators suggest some softening in hiring after February’s downside surprise, which was partly driven by weather-related disruptions. While the unemployment rate is expected to hold steady, there is a risk it could edge up to 4.5%.
A weaker-than-expected report could prompt markets to reassess expectations for future Fed rate cuts, which have already been largely priced out amid the conflict in Iran. Given the Fed’s dual mandate of price stability and full employment, policymakers are likely to view any short-term spike in energy prices as temporary, rather than as a signal for significant policy adjustments.
This article was written by Gina Constantin at investinglive.com.
