Monday starts quietly, with no major economic events planned for the FX market. For now, the focus remains on the development of the conflict in Iran.
The only other important event on Monday is Fed Chair Powell’s participation in a moderated discussion at Harvard University in Massachusetts, which will include questions from the audience. While it is no longer expected to move the markets, it is still important to watch for any significant trends.
On Tuesday, the Eurozone will release inflation data, while the US will announce JOLTS jobs and consumer confidence at the Conference Board. Canada will also report its GDP m/m.
Wednesday brings US data including ADP jobs change, m/m retail sales, and ISM manufacturing PMI. Canada will release the BoC Summary of Deliberations.
On Thursday, attention will focus on US jobless claims and on Friday the focus will be on average hourly earnings m/m, changes in non-farm employment and the unemployment rate.
It is also important to note that banks will be closed in many European countries, Canada and other parts of the world due to the Good Friday holiday, which may result in a decrease in funds and unusual market fluctuations.
Several members of the FOMC are expected to give comments throughout the week and do not forget that the change to daylight saving time occurred in Europe this weekend.
Inflation data for the eurozone is expected to come in strongly, driven by rising energy prices, which could complicate the ECB’s target for inflation to reach positive levels.
The ongoing conflict in the Middle East has increased price pressure, and its effects have been increasing throughout the month. However, as the situation progresses, it is still unclear how these dynamics will be reflected in the data.
Some analysts expect the ECB to start raising rates later this year, but it is too early to make any firm decisions.
In Canada, the GDP m/m consensus is 0.0%, compared to 0.2% previously. After moderate growth in December, Canada’s economy appears to have slowed.
This decline is mainly due to temporary disruptions in the motor vehicle sector and less work related to housing, caused by severe weather. However, strong energy production and strong consumer spending helped moderate the impact.
RBC analysts note that preliminary data points to a modest 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 moderate, with improvements in February and March to offset a weak start to the year. On the outside, Canada’s trade deficit is projected to narrow, supported by recovering auto imports and higher oil prices, and could see further improvement if energy markets remain strong.
From a monetary policy perspective, the BoC’s upcoming summary of its March decision is expected to strengthen the balance sheet, suggesting that the current policy rate is set appropriately as authorities monitor incoming data. However, the data may provide additional insight into how policymakers are concerned about renewed inflationary pressures, particularly from higher energy costs.
The consensus for US retail sales m / m is 0.4% against -0.2% before, while the main retail sales m / m is expected to print 0.3% vs. 0.0%
The main driver of this week’s data is likely to be strong car sales in February, although the broader outlook remains unencouraging. Higher energy costs are expected to weigh on consumer incomes, which is likely to reduce spending on non-essential items even as car sales increase.
In America, the average hourly earnings agreement m/m is 0.3% against 0.4% previously. Jobless claims are expected to rise by 56K, following a publication of -92K, while the unemployment rate is expected to remain unchanged at 4.4%.
Recent signs suggest an easing of hiring after the February shock, which was partly due to weather-related constraints. Although the unemployment rate is expected to remain stable, there is a risk that it could reach 4.5%.
The weaker-than-expected report could prompt markets to reassess prospects for future rate cuts by the Fed, which has been heavily bought during the Iran conflict. Because of the Fed’s dual mandate of price stability and full employment, policymakers are likely to view any short-term rise in energy prices as temporary, not as a sign of major policy changes.
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