Week of April 8

The US jobs data was the key focus from the previous week, as inflation numbers in the Eurozone came in lower than expected, adding to market movements. For the coming week, interest rate decisions return with meetings from the ECB, BOC, and RRBNZ. At the same time, United States inflation figures will take centre stage.

Week in Review

The start of the week was somewhat subdued, with European markets closed for a holiday.

US data shook up markets as the ISM manufacturing PMI unexpectedly increased into positive territory. However, the subsequent rise in US yields, accompanied by underperformance in stock markets, was cut short by ADP jobs numbers showing weakness in the services sector. Throughout the week, numerous Federal Reserve speakers maintained a narrative of caution regarding expected interest rate cuts later in the year. Meanwhile, Treasury Secretary Janet Yellen began a multi-day visit to China.

Inflation in the Eurozone proved slower than anticipated, raising expectations for the upcoming ECB meeting. German inflation fell below expectations at 2.2%, entering the central bank's target range. The final European manufacturing PMI was revised lower despite improvements in larger countries like Italy, which returned to expansion for the first time in a year.

Ongoing weakness in the Japanese yen prompted official commentary, consistent with past remarks. Former BOJ Governor Haruhiko Kuroda said that the yen's recent weakness had been excessive and that intervention was possible.

The OPEC meeting concluded with maintaining current production cuts, but compliance was noted to need improvement.

A major earthquake in Taiwan caused temporary shutdowns in semiconductor manufacturing. Companies continued assessing damage and potential production impacts through the weekend.

Biggest Market Movers

• The Turkish lira strengthened 1% vs the greenback after the opposition party saw strong gains in local elections over the weekend.
• WTI crude oil prices rose for the 4th week, touching $87.50 per barrel before correcting as the US cancelled SPR plans due to higher prices.
• Gold trended over 3% higher throughout the week, supported by a weaker US dollar.
• The FTSE 100 hit a fresh record high mid-week but failed to sustain the level and dropped shy of 1% instead.

Top Events in the Week Ahead

Central Banks Take Centre Stage

Central banks will take centre stage this week, primarily focusing on the ECB as the market counts down months until the first interest rate cut of the cycle. Current consensus estimates no easing until at least June, but statements and comments will face close scrutiny for any variations to that timeline. ECB President Christine Lagarde has insisted key first quarter data will impact the decision to cut rates, to become available by May. The euro reversed losses seen earlier in the week against the US dollar and could reach 1.10 unless support at 1.09 is lost, exposing 1.0725.

The BOC will also meet with added attention, as speculation suggests it may lower rates before the Fed due to perceived faster economic slowing in Canada compared to the US. The Fed will factor in via minutes from its last FOMC meeting. The USDCAD pair managed to close in positive territory but is currently finding support around 1.35 as this level is retested. A move above 1.36 could pave the way for fresh yearly highs.

The RBNZ recently halted its tightening cycle and surprised markets by signalling a pause. Expectations are for unchanged New Zealand rates again this week, with commentary tone watched for further guidance on stance. The New Zealand dollar lifted itself above 0.60 despite early declines to 0.5930, with resistance levels now at 0.6050 and 0.61.

US Inflation's Mixed Picture

For American markets, Wednesday's inflation figures headline the week. CPI growth is anticipated to tick higher, and core inflation slow further. Driven by fuel costs, higher headline inflation may prompt the Fed to discount the figure, favouring slowing PCE and core rates. However, both monthly inflation measures (core and headline) are expected to decelerate to 0.3% from the prior 0.4%, reflecting some base effects. Gold could be shaken on the back of US data. As prices continue registering single-digit percentage gains, this could open the door to reaching 2300 and beyond, so long as prices remain above 2220.

Trade and UK GDP

China will release its trade balance on Friday, which is anticipated to show a narrowing surplus thanks to import growth catching up with exports. Germany and France will also post trade balances during the week. Friday delivers UK monthly GDP figures expected at -0.3% in February, but the 3-month average is expected to rebound to positive 0.1% from the prior -0.1%. Sterling experienced volatility over the course of the week but could move higher still if it successfully reclaims 1.26. Further gains could then encounter resistance around 1.2735, with support identified at 1.2550.

Other Events and Earnings

Monday includes Japanese current account and Eco Watchers survey data. Tuesday has Westpac consumer confidence and NAB business confidence from Australia. Wednesday expects the Japanese PPI. The Eurogroup meets on Thursday when China's money supply and inflation also come out. Friday features French inflation and UoM consumer sentiment.

Early-week earnings remain light ahead of Friday's unofficial start to first-quarter results from major U.S. banks like JPMorgan, Wells Fargo, Citigroup, and State Street. Additional weekly earnings include Fastenal, Delta Airlines, Constellation Brands, and CarMax.