A heavy week for data, including inflation numbers in the US and Eurozone, labour market data in the US and New Zealand, Eurozone Q1 GDP and of course country and global manufacturing and service sector PMIs for April. These will provide the first glimpse of the pace of economic activity early in Q2 2018. The Federal Reserve and Reserve Bank of Australia also hold policy meetings this week but with rates likely on hold the focus will be on the accompanying statements’ tone and language.
Monday 30th April
United States: March personal income, spending and price index. Focus will likely be on the measures of headline and core PCE price inflation, with analysts expecting core PCE inflation – a measure which the Federal Reserve tracks closely, to have risen to 1.9% yoy from 1.6% yoy in February. Evidence that underlying US inflation continues to rise, albeit quite slowly, would likely reaffirm market expectations that the Federal Reserve will hike rate two and potentially three more times this year.
United States: March pending home sales. The US property market remains robust with pending homes sales having increased 3.1% mom in February.
Tuesday 1st May
Australia: Reserve Bank of Australia policy meeting. The RBA has painted a mixed picture of the economy in recent meetings and given no indication that it is even contemplating a rate hike any time soon. The RBA’s stance is unlikely to change materially although markets will be looking for signs that the RBA has become more sensitive to the Australian’s Dollar (albeit modest) depreciation.
United Kingdom: April manufacturing Purchasing Managers Index (PMI). This will give us a first glimpse of manufacturing activity in early Q2. But the manufacturing sector accounts for only 10% of the UK economy and with GDP growth having collapsed in Q1 markets are unlikely to get overly excited even if the manufacturing PMI rises from the 55 level recorded in February and March (a reading above 50 in this diffusion index suggests the manufacturing sector is expanding, while a reading below 50 suggests the manufacturing sector is in contraction). At the very least markets will want to see how the all-important services sector performed in April when data are released on 3rd May.
United States: April ISM manufacturing PMI. This indicator of economic activity has been steady near the 60 level for the past four months and even a modest slowdown to 58.6 in April – the consensus forecast – may not materially impact markets’ rate hike expectations or Dollar.
New Zealand: Q1 employment data. The New Zealand labour market is robust, as it is in Australia and the United States, with an unemployment rate of only 4.5% at end-2017, a participation rate of 71% and employment growth of 0.5% qoq. However, with CPI-inflation having halved to 1.1% yoy in Q1 from a year ago the RBNZ could conceivably issue a dovish-lite statement at its next meeting on 9th May.
Wednesday 2nd May
Global: April Manufacturing PMI. This index has tended to correlate quite closely with global GDP growth. The index has gently slowed for three consecutive months in a row, to 53.4 in March, albeit from a multi-year high in December, suggesting that global GDP growth may have struggled to accelerate further in Q1 2018 from around 3.7% yoy in Q4 2017.
Eurozone: Q1 2018 GDP (first estimate). Monthly Eurozone macro indicators and the slowdown in French GDP growth in Q1 give credence to analysts’ forecast that growth slowed to 0.4% qoq from 0.6% qoq in Q4 2017 and to 2.5% yoy from 2.7% yoy. This growth slowdown would certainly be less dramatic than in the UK but would leave the Eurozone trailing US economic growth, which may in turn be sufficient to put further downward pressure on EUR/USD.
United States: April ADP non-farm employment change. This measure of private-sector employment is seen as an important precursor to the official US non-farm payrolls data which are due on 4th May. Consensus forecast is for another solid increase in employment of 194,000, following a 241,000 rise in March.
Eurozone: German Bundesbank President Weidmann due to speak. Weidmann is notoriously hawkish but even he may struggle to make a convincing case for an immediate end to quantitative easing, let alone ECB rate hikes, given the likely slowdown in Eurozone growth and still moderate inflationary pressures.
United States: Federal Reserve policy meeting. Markets do not expect the Federal Reserve to hike its policy rate at this meeting and instead hike in June when it will also release updated quarterly forecasts. However, markets and analysts are likely to focus on the accompanying statement for any signs as to whether the Federal Reserve has shifted even slightly from its apparent core scenario of two further rate hikes in 2018.
Thursday 3rd May
United Kingdom: April services sector PMI. Service sector accounts for 80% of the British economy so if analysts’ forecast of an uptick in the services PMI to 53.3 in April (from 51.7 in March) is realised, this may provide some hope that GDP growth rebounded in Q2 after a dismal 0.1% qoq in Q4 2017. But even a strong PMI print is unlikely to materially change markets’ core scenario that the Bank of England will not hike rates on 10th May.
Eurozone: April CPI-inflation (preliminary). With underling growth seemingly a little softer, analysts’ forecast of unchanged headline CPI-inflation of 1.3% yoy in April has some merit. This would mean inflation staying in the middle of the narrow 1.1-1.5% yoy range in place since May 2017 and underpin the ECB’s desire for quantitative easing to keep stimulating the Eurozone economy for a little while longer.
United States: April ISM non-manufacturing PMI
Switzerland: Swiss National Bank (SNB) Thomas Jordan speaks. With the Swiss Franc trading at its lowest point since it was revalued in January 2015, markets will be looking for clues as to whether Jordan and the SNB may at this stage try to at least stabilise the currency via FX intervention and/or higher interest rates.
Friday 4h May
Global: April services and composite PMI.
United States: April labour market data. Headline numbers point to a US labour market nearing full-employment and the question is whether this will start feeding through more forcefully to faster wage growth and in turn inflation.
United States: FOMC members Dudley, Williams and Quarles to speak
