Goldman summarizes last week and previews the key events of the coming several days.
Foreign exchange markets traded mostly range-bound this past week... The market has sought to translate the improvement in US data since the beginning of the year to a bullish dollar view on the premises of a stronger US recovery and a shift in Fed’s policy towards a less dovish stance. But we did not think this was a likely combination of events. In our own base case, the improvement in US data would soon lose momentum and the Fed would remain dovish. Indeed, last week offered evidence in favour of our view; Chairman Bernanke’s comments combined with evidence of softer growth in various regional US surveys helped rejuvenate expectations for a dovish Fed stance.
The week ahead will offer significant inputs to our views. ISM and payrolls will likely set the market tone for the next few weeks. Despite the softer signals from regional surveys, we expect the ISM to improve at the margin relative to last month’s print. In contrast, we expect payrolls to grow by 175k, down from last month’s 227k jobs gain. FOMC minutes will likely show that Fed officials had a discussion on further easing but are unlikely to offer strong hints about the likelihood and possible timing of a third round of Quantitative Easing.
We do not expect the ECB’s and BOE’s rate setting meetings to provide any significant surprises and the final PMI data for the Euro area are also unlikely to stir the market in either direction. There are also no big auctions planned for the peripheral nations this week.
In terms of local EM stories, we continue to watch Indonesia inflation closely, as we think it can prove to be an area of local bond market volatility in the months ahead.
Monday, 2 April
- Euro area PMI Manufacturing (Mar Final): This is the final print of Euro area PMIs and consensus does not expect a deviation from the flash reading of 47.7.
- Euro area Unemployment Rate (Feb): Consensus expects an increase to 10.8% up from 10.7% in January.
- UK Manufacturing PMI (Mar): Consensus expects a March print of 50.78 from 51.2 in February.
- US ISM (Mar): Industrial surveys have sent mixed signs so far in the US. That said, we still expect the ISM to print at 53.5, while consensus expects a reading of 53.4 after 52.4 in February
- Indonesia Inflation (Mar): Inflation is key to watch given the relevant risks in the local bond market. Consensus expects 4.01%yoy, up from 3.56%yoy the previous month.
- BOJ Tankan (Mar): For this quarterly survey we expect the large manufacturing enterprises DI at -2 vs consensus at -1 after -4 in February.
- Also Interesting: Final Germany Services PMI for March, Russia Monetary Policy meeting and CPI, Brazil trade balance, Turkey GDP for Q4 2011, South Africa PMI.
Tuesday, 3 April
- US FOMC Minutes: We expect that the meeting included a discussion of possible easing options, but that the minutes will not provide a definitive signal about further QE.
- Also Interesting: Turkey CPI, Brazil IP, US Factory orders.
Wednesday, 4 April
- ECB Meeting: We do not expect that the ECB will alter its overall policy stance (base rate currently at 1.00%). The ECB’s take on slightly rising inflation figures recently will be interesting.
- Euro area PMI Services (Mar Final): This is the final printing of Euro area PMIs and again consensus does not expect a deviation from the flash reading of 48.7.
- UK PMI Services (Mar): Consensus expects little change to the services PMI (from 53.8 in February to 53.4 in March).
- USA ADP Employment (Mar): The labour market has been a source of stronger data in the US as of late and it is key to watch incoming information on that front.
- German Manufacturing Orders (Feb): The headline momentum in manufacturing orders will be as important to watch as the Geographic breakdown.
- Also Interesting: Euro area retail sales, Poland MPC meeting.
Thursday, 5 April
- UK Monetary Policy meeting: We (and consensus) expect rates and the asset purchase target to be unchanged at 0.50% and GBP325bn, respectively.
- United States Initial Jobless Claims: Previously at 359k
- Also interesting: Hungary Industrial Output, Czech Industrial Output, UK IP, Germany IP
Friday, 6 April
- USA Non-Farm Employment/ Unemployment Rate (Mar): We forecast that non-farm payroll employment increased by 175,000 in March, down from 227,000 in February (April 6). We expect that the unemployment rate declined another tenth to 8.2%.