FX Weekly: Trive’s Week Ahead Insights
This week highlights include the US NFP report given the recent growth scare coupled with higher inflation expectations.
Eurozone CPI (Monday):
The Eurozone CPI Y/Y is expected at 2.3% vs. 2.5% prior, while the Core CPI Y/Y is seen at 2.6% vs. 2.7% prior. There’s some risk aversion in the markets, so a soft report will likely ease some of those fears around inflation and give the ECB more confidence to keep with the policy easing. Higher than expected figures though would likely keep the markets on the edge. The market is expecting a total of 87 bps of easing by year-end.
US ISM Manufacturing PMI (Monday)
The US ISM Manufacturing PMI is expected at 50.8 vs. 50.9 prior. The recent S&P Global US PMIs showed another uptick on the Manufacturing front with the index rising to an 8-month high. The agency noted that many manufacturers also reported that the rise in production and demand was in part linked to front-running potential cost increases or supply shortages linked to tariffs, although future sentiment remained relatively elevated in manufacturing by recent standards.
Swiss CPI (Wednesday):
There’s no consensus at the time of writing for the Switzerland CPI although the prior release showed the Core measure rising to 0.9% vs. 0.7% prior. We haven’t got any notable data point or comment from central bank officials, but the market is certain of a 25 bps cut in March and is pricing around 60% probability of another 25 bps cut by year-end.
US ADP (Wednesday):
The US ADP is expected at 140K vs. 183K prior. This report will be seen in light of the recent growth scare, so the market won’t like downside surprises. On the other hand, strong data is likely to provide some support to the risk sentiment (all else being equal).
US ISM Services PMI (Wednesday):
The US ISM Services PMI is expected at 52.9 vs. 52.8 prior. The S&P Global survey showed some notable weakness in the Services sector with the index cratering to a 25-month low. The agency noted that service providers commonly linked the downturn in activity and worsening new orders growth to political uncertainty, notably in relation to federal spending cuts and potential policy impacts on economic growth and inflation outlooks. Optimism about the coming year slumped to its lowest since December 2022.
ECB Meeting (Thursday):
The ECB is expected to cut interest rates by 25 bps bringing the policy rate to 2.50%. We will get the Eurozone Flash CPI report a couple of days before the meeting so that will likely shape their future sentiment. There’s been a growing concern among some central bank officials about easing rates too fast amid high services price inflation (which has been stuck around 4% since November 2023) and tight labor market.
US NFP (Friday):
The US NFP is expected to show 153K jobs added in February vs. 143K in January and the Unemployment Rate to remain unchanged at 4.0%. The Average Hourly Earnings Y/Y is expected at 4.1% vs. 4.1% prior, while the M/M figure is seen at 0.3% vs. 0.5% prior. The Average Weekly Hours Worked is seen at 34.2 vs. 34.1 prior. The recent risk-off sentiment has been triggered by the jump to a 30-year high in the long-term inflation expectations in the final University of Michigan Consumer Sentiment report. That might have not caused the selloff in the stock market if it wasn’t for weak US Flash PMIs released just 15 minutes earlier. So, it kind of compounded the effect on expectations that the Federal Reserve could react too slowly to a slowdown in the economy due to the constraint of high inflation expectations which would eventually lead to more economic pain. Therefore, the best-case scenario would be benign employment data coupled with lower than expected wage growth data. Conversely, weak employment data and high wage growth figures would likely trigger another selloff in the stock market and renewed risk-off flows.
Canada Employment (Friday):
The Canadian Employment report is expected to show 17.5K jobs added in February vs. 76.0K in January and the Unemployment Rate to tick higher to 6.7% vs. 6.6% prior. Jobs data has been beating expectations by a big margin in the last couple of months as the aggressive BoC easing gave the economy a boost. The CAD though remains at the mercy of the tariffs threats with the markets watching what happens on Tuesday as the deadline expires.
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