UPCOMING EVENTS:
Tuesday: UK Labour Market, US Retail Sales, Canada CPI.
Thursday: Australian Labour Market, US Jobless Claims.
Friday: Fed Chair Powell.
Tuesday: The UK labour market report is expected to show the unemployment rate unchanged at 3.8%, the employment change at 160K and the average earnings ex-bonus rising to 6.8% from the prior 6.6%. The hot CPI report and the increase in wage growth were the biggest determinants in the latest BoE rate hike decision. Nonetheless, the BoE continues to do very little to bring inflation back to target.
The US Retail Sales are expected to show a 0.7% M/M increase in the headline number and 0.4% M/M in the core reading. The Control Group M/M is expected at 0.3% vs. -0.3% prior. This report, besides being volatile, is unlikely to change anything for the Fed as it’s mainly focused on the labour market and inflation reports.
The Canadian headline CPI Y/Y is expected to fall to 4.1% vs. 4.3% prior while the M/M figure is seen at 0.4% vs. 0.5% prior. The Core Y/Y reading is expected to rise to 4.4% vs. 4.3% prior. The BoC projected the CPI to fall around 3% in the middle of the year and if inflation proves to be sticky above their 2% target, Governor Macklem said that they are prepared to raise rates further to achieve their goal.
Thursday: The Australian labour market report is expected to show 25K jobs added with the unemployment rate unchanged at 3.5%. The RBA surprised at its last monetary policy meeting with a 25 bps rate hike as it judged the labour market too tight for a return back to their inflation target. Also, wages and inflation expectations keep rising and as RBA stated, it’s important that inflation returns to target within a reasonable timeframe.
US Jobless Claims keep being a market moving report as weakness in the labour market is what is needed to return inflation back to target. Initial Claims are seen at 254K vs. 264K prior and Continuing Claims at 1833K vs 1813K prior. Last week Jobless Claims surprised with a big miss, but it turned out that it was mainly due to fraud attempts in Massachusetts, so they are likely to be revised down.
Friday: All eyes are likely to be on Fed Chair Powell as the market will want to see how recent economic data has shaped his views and if he signals openness to another hike in June. The market is still pricing a pause in June and rate cuts starting from September.
This article was written by Giuseppe Dellamotta.
