The second quarter will start with too many economic updates, Easter Holidays on its first Friday, and the Chinese Ching Ming Festival on Monday. While the market is trying to play down the banking concerns, the RBA and RBNZ rate decision and the US and Canadian employment data will be in the spotlight in the week ahead.
1- Monday, April 3: Manufacturing Purchasing Managers’ Index in Europe
The week will start with PMI numbers across the globe. Most European countries, Eurozone and UK, will release their data. We expect that manufacturing activities in all mentioned areas to stay unchanged under the 50 expansion level. With central banks’ policies to cool down the economy and hawkish policies to control inflation, manufacturing activities can stay weaker in the first half of this year. Despite more inadequate expected PMI numbers, ECB can raise the rates by another 50 bps in the next meeting, favoring the Euro against its crosses.
2-Monday, April 3: ISM Manufacturing Purchasing Managers’ Index
The Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) for March, which measures the level of activity in the manufacturing sector, will be released on Monday. In February, the ISM manufacturing index decreased for a fourth straight month. We expect this weakness to extend into the fifth month, with a forecast of 47.5. Weaker PMI data will increase the pressure on the US dollar.
3- Tuesday, April 4: The Reserve Bank of Australia Meeting
The Reserve Bank of Australia (RBA) will announce its interest rate decision for April, which is expected to remain unchanged at 3.60%, as data shows inflation falling and economic growth is slowing. Last week’s published data showed that CPI inflation eased to 6.8% in February and should continue to trend lower in the coming months and quarters. RBA Governor Philip Lowe also recently discussed the potential pause in rate hikes, emphasizing incoming data as the base of RBA’s decision. Despite some progress in recently published PMI numbers and better-than-expected labor market data, a pause would allow for additional time to reassess the outlook for the economy and make a better decision in subsequent meetings. Therefore, it can only be paused, and to account for it as ending the rate hike cycle in Australia, it still needs more time and confirmation.
4- Wednesday, April 5: The Reserve Bank of New Zealand Meeting
Unlike RBA’s expected to pause, the Reserve Bank of New Zealand (RBNZ) is supposed to continue its hawkish policies. Since the beginning of the rate hike cycle, in the last two years, RBA has raised the rates by 450 bps, from 0.25% to 4.75%, and it seems to pause in 5% interest rates could give policymakers more time to analyze the economic condition before any further decision. Since the New Zealand inflation is still elevated, we expect a 25 bps rate hike at this meeting to 5.00%. With a 0.3% expected to shrink in Q1 2023 GDP following a 0.6% shrink last quarter, we should be more cautious about the successive hikes.
5- Wednesday, April 5: ISM Non-Manufacturing PMI
The service sector activities improved much better than the manufacturing sector, which is expected to rise above the 50-expansion level but lower than February 55.1. After seeing the three years low at 49.2 last December, January, and February raised perfectly, and for March, we expect the ISM Non-Manufacturing PMI at 54.5.
6- Friday, April 7: NFP in Good Friday
It is 11 months in a row that the labor market is rising much better than expectations, with 311K new jobs added just in February. While the participation rate is also acceptable, this improvement can be a sign that the labor market is still strong. However, Job openings and hiring have been reducing in recent months while layoff announcements have been rising. While we expect to see the current banking tensions effects in April job reports, estimating job growth to slow to 240K in March, unemployment to fall back to 3.5%, and average hourly earnings edging up to 0.3% monthly but fall to 4.3% annually. These data are supposed to encourage the continuing rate hike cycle, which could be positive for the US dollar and add pressure on stock markets.