Central banks always bang on about monetary policy being data-dependent. This week’s batch of PMI surveys, which complete the picture for Q1 GDP growth, will provide a good idea of just what they might be thinking. Friday’s nonfarm payroll numbers will be central to expectations of the US Federal Reserve’s course of action.

trading and economic calendar

PMI Surveys

April kicks off with the final PMI readings for Q1 for a host of major economies. With business surveys and recent PMIs hitting six-year highs markets expect another round of upbeat numbers for the manufacturing and services sectors.

Among the most closely followed releases is Wednesday’s UK services PMI. A bellwether for the wider UK economy, this report is likely to offer a clearer idea of just how resilient Britain’s businesses are in the face of Brexit. The manufacturing PMI on Monday will also be watched for signs of continued pressure on input prices which may indicate a further uplift in headline inflation.

Nonfarm Payrolls

The first Friday of the month sees the usual nonfarm payrolls release from the US. It comes at a crucial moment for Fed watchers as a spot of stock market turmoil has left investors questioning whether US interest rates will rise as fast as expected. We’ve seen doubts creep in, with markets now less certain of three hikes this year.

Fresh doubts about the Trump trade mean the US central bank may not need to, or wish to, tighten any more this year. A strong jobs report – and higher wages – would support the case for another hike irrespective of the politics.

We’re hosting a special live trading webinar in the minutes before the release. The webinar takes place at 12:00 on April 7th, with the NFP numbers due out at 13:30. In this live webinar we will review the markets just prior to the announcement, assessing market structures and identifying trends and potential markets of interest.

FOMC Minutes

Sticking with the Fed, on Wednesday is the release of the minutes from the March meeting of the Federal Open Market Committee (FOMC), which saw members vote for a 25-basis-point rise in rates. The minutes ought to give markets a much clearer understanding of how policymakers view the US economy and where they think the risks to the recovery are coming from.

Of note, Minneapolis Fed president Neel Kashkari didn’t think rates should rise yet and voted against hiking, which highlights there are still meaningful doubts about just how quickly and how far the Fed should raise rates in this cycle. The temptation to hike is being tempered by the fact that labour market slack (of which there is more than headline figures might suggest), means there is hardly any pressure on wages and that means inflation should not accelerate too quickly.

Politics

Political risk remains high. Article 50 has been triggered and markets will remain highly sensitive to develops as the UK and EU negotiate terms. Over in Washington, following the failed attempt to overhaul Obamacare, president Donald Trump will be looking to reassert his control over a recalcitrant Republican party. Any hint that planned tax reforms will be watered down is not likely to go down well with equity markets. Meanwhile, in Europe market participants will begin to focus on France as we approach the sharp end of the presidential election campaign.

Source: ETX Capital

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