Weekly Market Outlook (25-29 March)

UPCOMING EVENTS:

• Tuesday: US
  Durable Goods Orders, US Consumer Confidence.
• Wednesday:
  Australia Monthly CPI, Fed’s Waller.
• Thursday: BoJ
  Summary of Opinions, Australia Retail Sales, Canada GDP, US Final Q4 GDP,
  US Jobless Claims.
• Friday: US
  Good Friday Holiday, Japan Jobs data, Tokyo CPI, Japan Industrial
  Production and Retail Sales, US PCE, Fed Chair Powell.

Tuesday

The US Consumer Confidence is expected to
remain unchanged at 106.7 in March. The last
report interrupted a three-month positive streak as the data surprised with a
big miss to the downside across the board. The commentary highlighted that “while
overall inflation remained the main preoccupation of consumers, they are now a
bit less concerned about food and gas prices, which have eased in recent
months. But they are more concerned about the labour market situation
and the US political environment”. The Present Situation Index will be
something to watch as that’s generally a leading
indicator for the unemployment rate.

Wednesday

The Australian Monthly CPI Y/Y is expected
at 3.6% vs. 3.4% prior. The RBA focuses more on the quarterly CPI readings,
but the monthly indicator is timelier and can be a guide for the trend,
especially at turning points. The Core measures will be more important as
that’s what the RBA is more focused on. As a reminder, the RBA dropped
the tightening bias in their recent monetary
policy decision and we got a strong
labour market report soon after. Therefore,
unless we get a big downside surprise, the data shouldn’t change much for the
central bank and the market’s pricing.

Fed’s Waller will give a speech on the “Economic
Outlook” at the Economic Club of New York. Waller is a key FOMC member
because he’s been a “leading indicator” for changes in Fed’s policy. He was
the first one talking about QT in December 2021 and the first one mentioning
rate cuts in November 2023. Given the recent hot CPI reports and the FOMC
decision, it will be interesting to hear from him and it’s likely that he will
deliver some hawkish comments.

Thursday

The US Jobless Claims continue to be one
of the most important releases every week as it’s a timelier indicator on the
state of the labour market. This is because disinflation to the Fed’s target is
more likely with a weakening labour market. A resilient labour market though
will make the achievement of the target much more difficult. Initial Claims
keep on hovering around cycle lows, while Continuing Claims remain firm around
the 1800K level. This week, Initial Claims are seen at 215K vs. 210K prior,
while there’s no consensus for Continuing Claims at the time of writing
although the previous release saw an uptick to 1807K vs. 1820K expected and
1803K prior.

Friday

The Tokyo Core CPI Y/Y, which is seen as a
leading indicator for National CPI, is expected at 2.4% vs. 2.5% prior. We
got a Nikkei
report recently which stated
that the BoJ was considering a rate hike in July or October.
If we start to get hot inflation data, the market might start to price in a
July hike, but the Yen might not appreciate that much if the US data continues
to surprise to the upside.

The US PCE Y/Y is expected at 2.4% vs. 2.4%
prior, while the M/M measure is seen at 0.4% vs. 0.3% prior. The Core PCE Y/Y
is expected at 2.8% vs. 2.8% prior, while the M/M reading is seen at 0.3% vs.
0.4% prior. Forecasters can reliably estimate the PCE once the CPI and PPI are
out, so the market already knows what to expect. We might see a miss though as
Fed Chair Powell during his Press Conference said this about the February PCE: “We have it well below 30bps on core PCE”.