Week of April 3

After a week of relative calm in the markets, which saw returning optimism as worries over the banking situation faded, the focus is on starting a new quarter with fresh data to move the markets. Global PMIs on Monday and US NFP on Friday bookend a much more active week on the data front.

Top Events in Review

In the early part of the week, relatively scarce major data left currency markets generally range-bound. Stocks continued to drift higher as confidence in the banking sector slowly returned. US Final GDP was revised lower by a decimal to 2.6% compared to the preliminary reading. Both EUR/USD and GBP/USD gained around 1%.

Reports circulated that Fed Chair Jerome Powell had privately indicated to Congress that there would only be one more hike before the Fed started its anticipated pause for the rest of the year. The day after, Fed official Susan Collins (who is not on the FOMC this year) suggested that there would be a quarter of a point rate hike at the next meeting, and then rates would be held to at least December.

US March Consumer Confidence came in above expectations at 104.2 compared to 101.0. Meanwhile, the Bank of America Institute said credit card spending so far in March had fallen by 2%.

In geopolitics, tensions between the US and China were renewed over plans by Taiwan's president to visit the US as part of a trip to Latin America. This came as efforts were made to overcome the impasse caused by the spy balloon incident that saw US Secretary of State Antony Blinken suspend his trip to Beijing. Potentially US Treasury Secretary Janet Yellen could visit China. Elsewhere, Russia announced it would be stationing nuclear weapons in Belarus in the context of a largely stagnant front in the war in Ukraine. 

Biggest Market Movers

WTI crude prices spiked 8% higher for the week at some point on Friday, adding to earlier gains as the White House disclosed that the SPR wouldn't be quickly replenished. An arbitration resolution between Turkey and Iraq led to the temporary suspension of oil exports from Kurdistan. 

USD/JPY rose to 2% last week after the Fed reversed a large portion of its QT to provide liquidity to banks, ending a painful 4-week lodging streak as Q1 wrapped up.

Alibaba spiked nearly 20% as it announced a major restructuring initiative, transforming into a holding company that would manage six independent companies.

Top Events in the Week Ahead

The main events likely to set the tone for the markets are the release of PMIs from major countries around the world and job figures from the US. 

PMIs and NFP in Focus

China's official NBS was released on Friday, showing a multi-year high for the services sector. The private Caixin measure is expected to show an improved outlook for manufacturing but less optimism in the services sector. French, UK and German PMIs are expected to confirm the preliminary data showing a further decline in the manufacturing sector. Germany's DAX 30 rose some 3.50% last week, threatening bears with a fresh breakout. UK's own FTSE, on the other hand, gained around 2.50%. US manufacturing PMI is expected to improve but remain in contraction. 

With the markets closed for Good Friday, the BLS is still scheduled to report NFP, which is expected to show a decrease to 250K jobs added compared to 311K reported last time. The unemployment rate is expected to drop by 3.5% from 3.6% prior. Nasdaq hit an August peak of 13k last week, opening the door to higher levels. 

RBA Expected To Keep Rates On Hold

A slim majority of economists expect the RBA to hold rates steady, with a large minority supporting a 25bps hike. The reserve bank has noted potential issues in the banking sector that could warrant a pause, and February CPI came down, suggesting inflation peaked at the end of last year. AUDU/USD has resistance at 0.6725 and support at 0.6584.

Trade Balances Could Show Slowing Activity

The US trade deficit is expected to grow based on exports falling faster than imports. Canada expected to report a similar pattern, with balance switching to a deficit from a surplus following a drop in crude prices. 1.3472 is support for USD/CAD, and 1.3651 is resistance. Australia expected to see an expansion of its trade surplus after China announced lifting restrictions on coal imports.

Other Events and Earnings

On Monday is the release of the Tankan Large Manufacturers Index from Japan. Tuesday features German trade balance and JOLTs job openings. Wednesday sees the US ADP jobs survey. Thursday includes Canadian jobs data and Ivey PMI. There are releases from Acuity Brands, ConAgra Brands, Ferrexpo, Constellation Brands and Levi Strauss, among a relatively light corporate earnings schedule.