Starting off on Monday, the FX market will see a relatively light day in terms of scheduled economic events. Tuesday brings a flurry of activity with the release of flash manufacturing and services PMI data for various countries including Japan, France, Germany, the eurozone, the United Kingdom and the United States. Additionally, the U.S. will release new home sales data and the Richmond manufacturing index.
On Wednesday, attention will shift to Australia for the inflation data print, while in the U.S. the focus will be on core durable goods orders m/m and durable goods orders m/m. The Bank of Canada will also publish its summary of deliberations.
Thursday will see the release of advanced GDP q/q data, unemployment claims, and pending home sales m/m in the U.S.
Friday holds the most anticipated event of the week: The Bank of Japan's monetary policy announcement. Additionally, Swiss National Bank Chairman Jordan will speak at the SNB's General Meeting of Shareholders in Bern. While his remarks are not expected to be market-moving, he is known to sometimes make statements that surprise the market. Traders will closely monitor his speech for any mentions related to inflation and future rate cuts.
In the United States, key data releases Friday include the core PCE price index m/m, personal income m/m, personal spending m/m, revised UoM consumer sentiment, and revised UoM inflation expectations. The consensus is for U.S. new home sales to rise from 662K to 668K. New home sales grew over the past year due to builders' price incentives and the robust jobs market. High mortgage rates and affordability have put pressure on the pace of sales and prices, with prices for new homes falling to be only 3% higher than for existing homes.
Last month saw new home sales dip slightly, but an improvement is expected in the March data. According to analysts from Wells Fargo "a structural shortfall of available single-family homes as well as builders' ability to bridge the affordability gap with price incentives should support sales this year even as mortgage rates have swung higher in recent weeks."
The market expects that the headline CPI data for Australia will remain at around 3.4% which is just above the RBA target of 2-3% and the CPI m/m is likely to rise by 0.5% From a policy perspective, the Bank is likely to wait for more data before cutting interest rates, but if the CPI prints below consensus it might fuel rate cut expectations.
Lately the U.S. economy and the jobs market have had a robust performance, but signs of moderation may be on the horizon as GDP growth is expected to ease in the coming months. While consumer spending remains strong, challenges such as high interest rates and slower growth in real income could dampen economic momentum moving forward. For this week’s print the consensus for the advance GDP q/q is a drop from 3.4% to 2.5%.
The BoJ is expected to keep its policy target unchanged, but traders should monitor its quarterly outlook report. Analysts anticipate that there will be an upward change for the inflation outlook as a consequence of high wages and also the recent depreciation of the yen. Expectations for another rate hike from the BoJ will increase as the year progresses.
In the U.S. the consensus for the core PCE price index m/m is a rise by 0.3%, same as last month. The personal income m/m is expected to rise by 0.5% (prior 0.3%) and personal spending m/m is likely to rise by 0.6% (prior 0.8%).
The February surge in consumer spending, particularly in services, showcased the resilience of the U.S. consumers. However inflationary pressures have offset some of the robust gains in wage and salary income.
With expectations for continued solid spending in March, supported by increased retail sales, the challenge lies in balancing income gains against sticky inflation. As the year progresses, the impact of persistent inflation on real income and consumer spending is anticipated to become more pronounced, potentially tempering economic momentum.
